variable manufacturing overhead incurred
Financial Dictionary — Cost Accounting
Definition
Variable manufacturing costs incurred are the actual cost incurred for manufacturing costs other than direct materials and direct labor which increase as production volume increases. Examples include manufacturing supplies and electricity to operate production equipment.
Use cases, Example & Why it matters
Use cases
- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.
Example
- Example: The costing team uses **variable manufacturing overhead incurred** to allocate costs and analyze margins by product line.
Why it matters
- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.