What is a Factory Overhead Control Account?

A Factory Overhead Control Account, also known as Manufacturing Overhead Control Account or Factory Overhead Control Ledger, is an accounting record used to track and control the indirect manufacturing costs incurred in a production process. It is a general ledger account that represents the accumulation of all manufacturing overhead costs during a specific accounting period.

Indirect manufacturing costs, also referred to as factory overhead costs, include expenses such as utilities, depreciation of factory equipment, factory rent, maintenance and repairs, factory supplies, indirect labor, and other miscellaneous costs not directly tied to specific products.

The Factory Overhead Control Account serves as a central account to record and monitor the actual overhead costs incurred throughout the production process. These costs are typically not directly traceable to individual products or production orders, so they need to be allocated or assigned to products using an appropriate cost allocation method, such as predetermined overhead rates or activity-based costing.

At the end of an accounting period, the total actual overhead costs recorded in the Factory Overhead Control Account are then compared to the allocated or applied overhead costs, which are determined based on the predetermined rates or cost allocation methods. Any difference between the actual and applied overhead costs may result in underapplied (under-absorbed) or overapplied (over-absorbed) overhead, which needs to be adjusted and accounted for.

The Factory Overhead Control Account provides a means for tracking and controlling the indirect costs associated with the manufacturing process. It helps management monitor the overhead expenses and evaluate the efficiency and cost-effectiveness of the production operations.

Caroline Grimm

Caroline Grimm is an accounting educator and a small business enthusiast. She holds Masters and Bachelor degrees in Business Administration. She is the author of 13 books and the creator of Accounting How To YouTube channel and blog. For more information visit: https://accountinghowto.com/about/

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