A manufacturer's utility bill is more complicated. The utility bill for its selling and general administration will be an expense for the period indicated by the meter reading dates. However, the utility bill for the direct and indirect manufacturing operations is part of its manufacturing overhead. As such, the utility bill will be assigned or allocated to the units produced. In other words, the utility bill will be clinging to the units produced. Some of the utility cost will be clinging to the units in inventory and therefore will be part of the cost of the asset inventory. Some of the utility cost will be clinging to the units that have been sold and will be part of the expense known as the cost of goods sold.
Is a utility bill an expense?
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Related TopicsBalance Sheet Manufacturing Overhead Income Statement Accounting Principles Inventory and Cost of Goods Sold Accounting Basics