Manufacturing Overhead

Manufacturing overhead refers to indirect costs incurred during production that cannot be directly attributed to a specific product, including indirect materials (such as lubricants and cleaning supplies), indirect labor (such as wages of workshop management personnel), factory depreciation, equipment maintenance, utilities, and insurance. In foreign trade, manufacturing overhead is an important component of cost accounting and quotation, directly affecting the pricing and profit of export products. Usage scenarios include: factory cost accounting, FOB/CIF quotation, cost allocation for processing trade, and negotiation of price composition with foreign buyers. Notes: Manufacturing overhead should be allocated to products based on reasonable criteria (such as labor hours or machine hours); different countries' accounting standards may define manufacturing overhead differently, so it should be clarified in contracts; it is listed alongside direct materials and direct labor as the three major production costs. Unlike selling expenses and administrative expenses, manufacturing overhead is only related to the production process and should not be included in period expenses. Foreign trade practitioners need to accurately calculate manufacturing overhead to avoid underquoting or overquoting, while also paying attention to the impact of exchange rate fluctuations on costs.