 Hello in this lecture we will define manufacturing overhead. According to fundamental accounting principles wild 22nd edition the definition of manufacturing overhead is factory activities supporting the production process that are not direct materials or direct labor also called overhead. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need then can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. When we're thinking about manufacturing overhead according to this definition we are defining overhead by saying what it is not. It is not direct materials and it is not direct labor. What it is as our direct material and direct labor are components of inventory. Therefore we're talking about a production process we are producing inventory we're tracking that inventory we generally will track three things with relation to inventory for example if we're making tablets here there's three kind of components to that end product as we make it through the production process those components including direct materials like the plastic and whatnot that goes in it direct labor the actual labor that goes into that component. These are not what we're talking about here we're talking about everything else everything else that is part of this ended inventory that is part of this tablet that we cannot apply directly to the tablet as we can with direct materials and direct labor will then go into overhead. Why is that necessary because we want to have the cost per tablet in some way and we can do that by applying these direct material and direct labor directly to that particular item that particular inventory that particular job or process whatever process we are using in terms of tracking inventory but the things that we're going to put into overhead are going to be everything else it's the bucket that's everything else that's why the definition defined it as what it's not what it's not it's not direct materials not direct labor it's everything else for example if we have the supervisor salary supervisor salary cannot be applied directly to this piece of inventory here because the supervisor is working on all the inventory so we want to apply her wages to the inventory in particular but we can't do it directly we got to put it into the bucket and then apply it out in some way using some type of estimate same thing would be the same for something like glue or small materials you might be thinking well the glue is directly involved in the production here of the inventory however it's pretty small in nature so therefore it might not be worth us tracking the cost of each unit of glue that's going into this particular inventory product therefore it's probably more cost effective for us to just put it in the overhead and then apply it out using some type of estimate any maintenance in in the area the space the warehouse or wherever the production facility where we're producing the inventory should also be included in the cost of the inventory again we know it's in there as a whole in inventory but we need to track it to the particular units or the jobs or the process can't do that with just the maintenance on the entire facility therefore we put it in the overhead we'll use an estimate to do that an estimate to do that later then anything else like that's involved in the factory including utilities utilities also is something we want to apply to the particular inventory but cannot do so directly therefore put it in and put it into overhead and then apply it out anything that says factory on it basically and is involved is involved in the inventory but can't be applied directly then would be included in overhead things like rent on the factory depreciation on the factory depreciation on the equipment are some other examples