What Is Manufacturing Overhead?

Manufacturing expenses refer to various indirect expenses incurred by an enterprise to produce products and provide labor services, including utility costs incurred by the production department of the enterprise (such as the production workshop), depreciation of fixed assets, amortization of intangible assets, employee compensation for management personnel, and labor protection fees 2. National environmental protection costs, seasonality, and loss of downtime during repairs. ^[1]

Manufacturing costs

Manufacturing expenses refer to various items incurred by the enterprise to produce products and provide labor services.

The enterprise shall set up a "manufacturing expense" account for the total classification calculation. The account should be set up for different production units

1. Consumption of machine and materials in the production workshop, debit the subjects, and credit "raw materials" and other subjects.

2. Wages and other staff of production workshop managers

The expenses and expenses incurred by various production units of the enterprise such as production workshops and branch factories to organize and manage production activities and

Auditors should review the main items of manufacturing expenses as follows:

Manufacturing cost repair cost

(1) Examine whether the repair costs actually occurred and whether their expenditures were in compliance and reasonable.

(2) According to the accrual basis and the principle of matching income with expenses, find out whether the amount of repair costs included in the current cost is correct and reasonable, and whether the boundaries between daily repair and overhaul costs are clearly defined.

(3) For certain repair fees paid to external units or outsourced workers, it should be checked whether the prices are reasonable.

Manufacturing cost machine material consumption

Consumption of mechanical materials is various materials consumed for maintenance of fixed assets and other equipment, excluding materials for repair and labor protection. It mainly examines the trueness and rationality of its expenses and the correctness of its expenditure scope.

Manufacturing expenses

Special attention should be paid to the examination of the original vouchers for stationery, printing, post and telecommunications, office supplies and other expenses in the office expenses, check whether the invoice or receipt is on the checked company, the calculation of the amount is correct, whether the company has a special sales agency If the office expenses of the union are mixed with the manufacturing expenses, etc.

Manufacturing expenses

(1) Examine whether the travel expenses expenditure standards formulated by the enterprise are compliant and reasonable. If it does not comply with national regulations, find out the reasons and investigate according to relevant regulations.

(2) Check the detailed account of "travel expenses" with the original vouchers when the expenses occurred, and check whether the contents are true and compliant.

Manufacturing expenses Labor protection fees

Mainly review the actual occurrence of labor protection fees, check whether the invoice is signed by the leader or person in charge, and whether labor protection supplies have been issued in accordance with regulations.

Manufacturing cost downtime loss

Loss due to shutdown includes various expenses incurred by a certain production unit of the enterprise during the shutdown, such as production workers' wages and employee benefits paid during the shutdown, fuel and power costs consumed, and manufacturing costs that should be borne. The accountants should check the reasons for the shutdown respectively. Due to seasonal production and shutdown losses during overhaul, they are recorded in manufacturing expenses, and the remaining shutdown losses are recorded in non-operating expenses, corresponding to the unit or individual responsible for the fault. The compensation for the burden shall be deducted from the loss of stoppage.

Depreciation expense

The review should first approve the amount of fixed assets used as the base for extraction, and then check whether the proportion and method of depreciation and the scope of expenditure are correct. Auditors often encounter the following non-compliance situations:

(1) For fixed assets that have been delivered for use and have not yet completed the final accounts, no depreciation is required or the depreciation that has been provided for according to the original valuation is not adjusted according to the final accounts.

(2) Fixed assets leased through financing leases are treated as unleased depreciation of other leased assets; fixed assets leased out and leased fixed assets are not depreciated.

(3) Fixed assets leased or borrowed under operating leases are depreciated; fixed assets that have been fully depreciated are subject to depreciation.

(4) The depreciation of the fixed assets started in this month was withdrawn in the current month; the depreciated fixed assets in this month were not depreciated in the current month.

(5) Depreciation charges for rental and lending of fixed assets are included in manufacturing costs.

(6) Depreciation fees included in dormitories, canteens, bathrooms, corporate administrative offices, and warehouses are included in manufacturing costs.

(7) The net loss of various fixed assets is listed as depreciation and recorded in manufacturing expenses.