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Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. The manufacturing cost is classified into three categories: direct materials cost, direct labor cost and manufacturing overhead. [1] It is a factor in total delivery cost. [2]
A pre-determined overhead rate is normally the term when using a single, plant-wide base to calculate and apply overhead. Overhead is then applied by multiplying the pre-determined overhead rate by the actual driver units. Any difference between applied overhead and the amount of overhead actually incurred is called over- or under-applied overhead.
Factory overhead, also called manufacturing overhead, manufacturing overhead costs (MOH cost), work overhead, or factory burden in American English, is the total cost involved in operating all production facilities of a manufacturing business that cannot be traced directly to a product. [1] It generally applies to indirect labor and indirect cost.
Most predetermined motion time systems (MTM and MOST) use time measurement units (TMU) instead of seconds for measuring time. One TMU is defined to be 0.00001 hours, or 0.036 seconds according to MTM100 and 0.0000083 hours, or 0.030 seconds according to BS100. [1] These smaller units allow for more accurate calculations without the use of decimals.
Overhead costs for a business are the cost of resources used by an organization just to maintain its existence. Overhead costs are usually measured in monetary terms, but non-monetary overhead is possible in the form of time required to accomplish tasks. Examples of overhead costs include: payment of rent on the office space a business occupies
Backflush accounting is employed where the overall business cycle time is relatively short and inventory levels are low. Backflush accounting is inappropriate when production process is long, and this has been attributed as a major flaw in the design of the concept.
Process costing is an accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process. [1] Costs are assigned to products, usually in a large batch, which might include an entire month's production.
Overall equipment effectiveness [1] (OEE) is a measure of how well a manufacturing operation is utilized (facilities, time and material) compared to its full potential, during the periods when it is scheduled to run. It identifies the percentage of manufacturing time that is truly productive.