Indirect materials could include disposable gloves put on at the beginning of a shift. Re-usage applicators that you can use over the course of assembling several products. anti-static matting put on a bench at the beginning of a shift. Each of these items aren't directly tied to the production of a single unit.
@commonsense49933 жыл бұрын
Correct. James Ball - Thank you for correcting that. Glue for the mirror is direct materials. Rather than steel and rubber, he should be talking about steel panels and rubber tires - things that the car factory would have and use. Gloves, wipes, shelving to hold parts, computers to track inventory, etc are all indirect materials. Importantly, indirect labor is mfg management, quality assurance, shipping and receiving, data entry etc who do not actually assemble, configure, and test the car but work in the mfg side. Then administration costs include accounting, sales, marketing, non-mfg managment etc., which are not included in indirect costs.
@Edspira9 жыл бұрын
Great question Steve! Corporate office staff such as H.R. or accountants would be classified as SG&A expense (selling, general, and administrative expense) which is a period expense. Period expenses are different from product expenses (such as direct labor and indirect labor) in that they do not attached themselves to the product. Thus, when you pay the corporate accountant, you expense his or her salary when you incur it (it does not become part of inventory or flow through cost of goods sold). Indirect labor is a product cost, not a period cost like SG&A, so it does attach itself to the product and flow through inventory and cost of goods sold. An example of indirect labor expense would be the salary of a janitor who sweeps the floor in the factory. This is contrasted with direct labor, in that direct labors typically touch or handle the product in some way (although not necessarily). Although a janitor is working in the factory, he or she isn't directly making the product so their salary is indirect labor. An example of direct labor would be a factory worker who assembles vehicles at an automotive manufacturing plant.
@ixus10018 жыл бұрын
+Education Unlocked So we don't include the wages paid to labors who are hired for certain period?
@DanielPerez-jv7nm5 жыл бұрын
I owe you big time. These videos are helping me better than my CPA courses. GREAT CONTENT!
@2012jakm74 жыл бұрын
Im 2 years out of Post-secondary, I used to *have to* watch these types of videos for economics courses regularly. its interesting now being out in the real world, and being currently exposed to issues in pricing of goods at the Manufacturing company I work for. Now I am voluntarily coming back to watch the same videos I *had to* watch 3/4 years ago. This is interesting stuff, but more so now that I'm using it in the the workplace.
@Edspira4 жыл бұрын
Glad to hear you're still finding it useful!
@amflippy113410 жыл бұрын
Thank you for this. I finally have a better understanding about the "Manufacturing Overhead." I needed this for our test. :)
@jordanmott81659 жыл бұрын
You are actually a saviour!!!!!! Keep it up! So good!
@chuckstertv9 жыл бұрын
Thank you so much for this video, it clearly answered a lot of questions I had on Manufacturing Costs.
@sohaibahmed2265 жыл бұрын
Very well and simply explained.
@theboombody4 жыл бұрын
Accounting is like a lot of other things. It can start out really simple, and it can get a whole lot more complicated once you start adding on a bunch of layers.
@Millionsbyfaith10 жыл бұрын
Thank you so much!!
@kerrydickinson44464 жыл бұрын
Thank you for your great videos, I have been studying for a while now and your videos are the most interesting and comprehensive. You make very difficult concepts easy to understand. Thank you
@ericasmith23876 жыл бұрын
Great video! Thanks!
@Edspira6 жыл бұрын
Glad you liked it, hope your course is going well!
@MyFinancialFocus2 жыл бұрын
Time to build machines to reduce labor costs :)
@learnwithsreynut3 жыл бұрын
Good explanation, thanks
@Edspira3 жыл бұрын
No problem!
@ellag39978 жыл бұрын
this really helped! thanksss
@Edspira8 жыл бұрын
+Ella G My pleasure!
@itumelenglefafa71119 жыл бұрын
thanks a lot for the insight.
@MsSuperspirit10 жыл бұрын
Thanks 😊
@sandesh10368 жыл бұрын
Thanks a bunch....
@kimmoyt1898 жыл бұрын
thanks this video is amazing
@RHAishwarya2 жыл бұрын
Why do classify direct labor as product cost it is expensed as and when the period for example a labor working in factory for assembling his wages will expensed when the period ends not when the product is sold.... please clarify
@LeviAndersen9 жыл бұрын
thanks pal!
@myfaizahmad97826 жыл бұрын
Hi can you plz describe why the overhead cost behaviour is so complex and how it became the part of the product cost?
@shahwaizbinmahmood81424 жыл бұрын
Tysm
@heranzekarias19952 жыл бұрын
Grinder used to cut the steel
@oddthehuman42942 жыл бұрын
so could you replace the word "Manufacturing Overhead" with Factory overhead?
@SteveSuriadjaja9 жыл бұрын
Are employees in the Corporate Office (Accountants, HR, Finance, Executives, Project Managers, etc) considered to be Indirect Labours? Thus, they contribute to the Overheads? Cheers.
@smoeun88597 жыл бұрын
When I calculate total manufacturing cost, do I include all of the indirect cost such as indirect materials, indirect labour and indirect overhead?
@ecosystems7 жыл бұрын
What about excess factory capacity Costs (EFCC)? How are EFCC figured in calculating unit cost and also where should they be presented? I assume in the COS section but possibly there is guidance that they be placed in SG&A? Any thoughts would be appreciated.
@Edspira7 жыл бұрын
Sometimes it would be in COS, this is a major issue that department heads will fight about. No one wants to pay for excess of idle capacity.
@yoshinegus40198 жыл бұрын
Please do not tie (or glue) the janitor to your car!
@nawafXjohn4 жыл бұрын
🤣😂 "You can't fire me, that's what they taught be in accounting"
@norah.benr232 жыл бұрын
so the manufacturing overhead --> is the indirect costs.
@karthikyadavb37067 жыл бұрын
I want to know how to calculate direct material rate per unit
@harveylu12647 жыл бұрын
Wow, this helps. Thanks :-)
@EricaFioriGentry6 жыл бұрын
What category would a floor supervisor fall into?
@Edspira6 жыл бұрын
Direct Labor is also known as "touch" labor. The floor supervisor would not be considered direct labor because they aren't physically touching the products being produced and their labor can't be traced to an individual product being produced. Instead, the floor supervisor would be considered indirect labor, which is a part of Manufacturing Overhead. It's very similar to the example of the janitor in the video. Great question!
@IBU113T56 жыл бұрын
Is the manufacturing overhead the sum of fixed and variable overheads?
@Edspira6 жыл бұрын
Yes, there is a fixed component of manufacturing overhead and a variable component of manufacturing overhead. When people simply say "manufacturing overhead" they typically mean both the fixed and variable component together (unless they state otherwise).
@thedavish0m3t3am7 жыл бұрын
Would Manufacturing Overhead include period costs?
@stanfordmunampamba58316 жыл бұрын
great
@sortitus8 жыл бұрын
Would glue still not be considered direct materials even if you could trace specific amounts to each car? Lubricant for a machine that makes parts seems a little closer to your description, since the lubricant wouldn't end up on the car, though you could still find a way to average the amount of lubricant you need for the machine per car and split it out that way if you wanted to. Maybe you'd have to go to something a bit less direct like the janitor's supplies to find an overhead that couldn't easily be attributed to specific cars. Maybe you'd have to decide at what point something becomes overhead somewhat arbitrarily, and this is an example of managerial accounting's flexibility.
@dineomogoru38 жыл бұрын
Glue is an overhead because we estimate how much we would use its not exact and when you look at the final product you cant see the glue but its there used to attach the final product. That is how I understand it. An overhead is used in coordination with the final product.
@sajahmed4u5 жыл бұрын
Will unit cost of machine used for the manufacturing be a direct cost? for example I need to use a drilling machine to drill a hole in the product and the cost of the drill machine is $ 2.00 per hour. So if I use the drill machine for half an hour, will $ 1.00 be included in the direct cost ?
@bunnyman6321 Жыл бұрын
You figure it out yet?
@MisterR828 жыл бұрын
How do I calculate direct labor when the figures aren't presented and i need to complete a partially completed sheet?
@rhenlovesth8 жыл бұрын
I have the same question also.
@bcet44223 жыл бұрын
You could use the labels to determine if the cost is direct or indirect. So if it says manager of sales department, for example, that would only be direct if the cost object is 'sales'.
@RumbleLab5 жыл бұрын
Other Indirect materials... Welding rods to fix equipment when it breaks and anything mtce will use.
@alberthandly76308 жыл бұрын
where would usage electricity goes into
@tuan25588 жыл бұрын
is property, plant equipment is it in manufacturing overhead? please help me
@dineomogoru38 жыл бұрын
here we are discussing product cost so for example if a machine is used to convert a good (which would be our final inventory ) the depreciation of the machine would be allocated as a depreciation cost (an overhead) on that specific job
@ben335846 жыл бұрын
car paint is direct material right
@Edspira6 жыл бұрын
You are correct. If it is part of the final product that goes out the door, then I'd consider it a direct material. Even though it isn't easy to trace the exact amount of paint used, the company could have a standard such as 1.5 gallons of paint is used per vehicle in order to track the costs per vehicle. More examples of indirect materials would be cleaning supplies for the factory and oil to lubricate the machines.
@pets44894 жыл бұрын
This guy when he figures out how Lotus frames are built 😳 (They're glued aluminum)
@yoshinegus40198 жыл бұрын
Please do not tie (or glue) the janitor to your car!