Planning of Variable and Fixed Overhead Costs
We’ll use the Webb Company example again to illustrate the planning and control of variable
and fixed overhead costs. Recall that Webb manufactures jackets that are sold to distributors
who in turn sell to independent clothing stores and retail chains. For simplicity,
we assume Webb’s only costs are manufacturing costs. For ease of exposition, we use the
term overhead costs instead of manufacturing overhead costs. Variable (manufacturing)
overhead costs for Webb include energy, machine maintenance, engineering support, and
indirect materials. Fixed (manufacturing) overhead costs include plant leasing costs,
depreciation on plant equipment, and the salaries of the plant managers.