Definition of Nonmanufacturing Overhead Costs
Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other words, these costs are not part of a manufacturer’s product cost or its production costs (which are direct materials, direct labor, and manufacturing overhead).
Nonmanufacturing overhead costs are the company’s selling, general and administrative (SG&A) expenses plus the company’s interest expense.
Since nonmanufacturing overhead costs are outside of the manufacturing function, these nonmanufacturing costs are immediately expensed in the accounting period in which they are incurred. That is why accountants refer to nonmanufacturing costs as period costs or period expenses.
Examples of Nonmanufacturing Overhead Costs
Examples of the nonmanufacturing overhead costs include the salaries and other expenses for the following business activities: selling, distribution, marketing, finance, accounting, IT, human resources, legal, and so on. (We have additional examples within our AccountingCoach.com topic Nonmanufacturing Overhead.)
While the nonmanufacturing overhead costs are not allocated to the products, the company must have its selling prices and sales revenues sufficiently large to cover both the product costs and the period expenses to have a positive amount of net income.
