Shoe Glass Manufacturing Company castings and other glass parts to various customers as per order. The Company uses Job Order Costing system. For the current year 2021, the company estimated that it would work 400,000 machine- hours and will incur P2,800,000 in manufacturing overhead cost. The company had no work in process at the beginning of the year. The entire month of January was spent on Job Order 777, which was an order for 4,000 window glass parts. Cost data for January as follows: a. Raw materials purchased on account, P300,000 b. Raw materials requisitioned for production, P270,000 (90% direct and 10% indirect). c. Labor cost incurred in the factory, P190,000, of which P100,000 was direct and the balance indirect cost. d. Depreciation recorded on factory equipment is P68,000. e. Other manufacturing overhead costs incurred, P55,000, 50% of which paid and the balance on account. f. Manufacturing overhead cost was applied to production on a basis of 34,000 machine-hours worked during January. g. The completed job was moved into the finished goods warehouse on January 31 to await delivery for the customers. (Assuming that all work in process has been completed)

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.