Final answer:
Manufacturing overhead includes all costs associated with production except for direct materials and direct labor, such as indirect materials, indirect labor costs, and other non-direct costs like maintenance and utilities.
Step-by-step explanation:
Manufacturing overhead includes all manufacturing costs except direct materials and direct labour. This encompasses costs such as indirect materials, indirect labor costs, and other expenses not directly tied to the production of a specific product, like maintenance, utilities, and rent for the manufacturing facilities.
Examples of indirect labor costs would be the wages of factory maintenance personnel, supervisors, and quality control staff. These costs are sometimes referred to as the 'burden' in manufacturing businesses. It is important to correctly categorize these overhead costs to ascertain the true cost of producing an item and for proper financial reporting.
Although variable costs, such as raw materials or direct labor, change in proportion to the level of production output, some variable costs may be included in manufacturing overhead if they are not directly traceable to specific units of product. Conversely, fixed costs, like rent for the factory space, remain constant regardless of the production volume and also fall under manufacturing overhead.