Factory overhead refers to the indirect costs associated with operating a manufacturing facility or factory. These costs cannot be directly attributed to a specific product or service, but are necessary to keep the production process running smoothly.
Factory overhead costs can include a wide range of expenses, such as rent and utilities for the factory, depreciation of manufacturing equipment, maintenance and repairs on equipment, salaries and benefits for factory managers and supervisors, and other indirect expenses related to manufacturing operations.
Calculating factory overhead costs can be complex and can vary depending on the specific manufacturing processes and equipment used. However, these costs are typically included in a company’s cost of goods sold (COGS) and are used to determine the overall cost of producing a product or service.