Final answer:
A typical manufacturing overhead cost refers to the indirect costs incurred in the production process that cannot be directly attributed to a specific unit of production. These costs include expenses like rent, utilities, maintenance, and administrative costs. Spreading the overhead means allocating the total manufacturing overhead cost across all the units produced.
Step-by-step explanation:
A typical manufacturing overhead cost refers to the indirect costs incurred in the production process that cannot be directly attributed to a specific unit of production. These costs include expenses like rent, utilities, maintenance, and administrative costs. Manufacturing overhead costs are usually allocated to products using a predetermined overhead rate based on the estimated level of activity, such as direct labor hours or machine hours.
For example, if a manufacturing company has an annual manufacturing overhead cost of $1,000,000 and produces 100,000 units, the manufacturing overhead cost per unit would be $10. This means that for each unit produced, an additional $10 is allocated as manufacturing overhead cost.
Spreading the overhead refers to allocating the total manufacturing overhead cost across all the units produced, so that each unit carries a portion of the overhead cost. This helps to distribute the indirect costs fairly among all the products and provides a more accurate representation of the total cost of producing each unit.