Manufacturing overhead costs include which of the following?

• A. Raw materials purchased for production
• B. Indirect materials and factory utilities
• C. Sales commissions paid to sales staff
• D. Direct labor used in production

Answer: (B)

Verified step by step guidance

1. Understand the concept of manufacturing overhead: Manufacturing overhead includes all indirect costs associated with the production process that cannot be directly traced to specific units of product. These costs are necessary to run the production facility but are not directly tied to the production of goods.
2. Identify the components of manufacturing overhead: Examples of manufacturing overhead include indirect materials (e.g., lubricants, cleaning supplies), indirect labor (e.g., factory supervisors, maintenance staff), and factory-related expenses (e.g., utilities, depreciation on factory equipment, rent for the factory).
3. Analyze the options provided: Evaluate each option to determine whether it qualifies as a manufacturing overhead cost. For example, raw materials purchased for production are direct costs, not overhead. Sales commissions are selling expenses, not related to production. Direct labor is a direct cost, not an overhead cost.
4. Focus on the correct answer: Indirect materials and factory utilities are part of manufacturing overhead because they are necessary for production but cannot be directly traced to specific products.
5. Conclude the reasoning: Based on the analysis, the correct answer is 'Indirect materials and factory utilities,' as these are indirect costs that support the production process and fall under manufacturing overhead.