The manufacturing account is a general ledger account used by a manufacturer to accumulate production costs such as direct materials, direct labor and manufacturing overheads. The account is used to calculate the manufacturing cost of goods completed during an accounting period.
Predetermined Overhead Rate
A business calculates a predetermined overhead rate based on estimated overhead and activity levels in order to be able to apply overhead to its product costs.
Quiz 41: Ending Work in Process Quiz
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Quiz 40: Product and Period Costs Quiz
Test your knowledge of bookkeeping with our online product and period costs quiz.
Product and Period Costs
A business needs to separate period and product cost as product costs are included as part of the inventory until the product is sold, whereas period costs are treated as an expense in the income statement in the period in which they are incurred.
Manufacturing overheads, refer to all the indirect costs incurred in the factory necessary to run the manufacturing operation while the product is being produced.