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Isn't all overhead fixed?

Author:
Harold Averkamp, CPA, MBA

Not all overhead is fixed. Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable.

A common example of a variable overhead cost is the electricity used to operate factory equipment. The electricity is an indirect manufacturing cost (since it is not part of the direct materials or direct labor) and the total cost of the electricity used in the factory will increase when the equipment is used to create more products. There will also be less total electricity cost when the equipment produces fewer units of output.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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