How do I add manufacturing overhead costs as COGS?

Generally Accepted Accounting Principles (GAAP) expect you to account for all manufacturing overhead costs as cost of goods sold (COGS). There are two ways to account for manufacturing overhead costs, based on whether those costs are labor or non-labor:

  • If you have labor involved in the factory maintenance process, enter them on the Assumptions/Costs/Personnel page. Set their “Salary Charged to” to Manufacturing and Production. Then click on the Advanced button on the right side of their personnel row. Once on the Advanced pop-up page you’ll see a field called “Percent COGS vs. Expense”. By default, this appears as 0%. If this individual will be working 100% on COGS (e.g., on factory maintenance), change this to 100%. If s/he will be working 50/50, set it to 50%, and so on. Then we will allocate the appropriate portion of these individuals’ salaries to COGS each year.
  • If you have materials being used in the maintenance process, enter those materials on the Assumptions/Costs/Raw Materials page. Here you will define in what quantity you purchase it and at what cost (e.g., lubricant in how many gallons and at what cost per that many gallons). Then on the Assumptions/Costs/COGS page, select the “Products by Raw Material” view, not the “Raw Materials by Product” view”, so you can easily define how much product you can produce for each unit of this raw material. Then we will allocate the appropriate portion of this raw material to COGS each year based on much product is produced that year.

Related Questions:

How handle factory/manufacturing workers?

Where do I enter/change raw materials?

How do I relate raw materials to products I sell?


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