Overheads

Overheads (Definition)

Overheads are ongoing business expenses not directly attributed to creating a product or service.

Key aspects of overheads include:

1. Also known as indirect costs or fixed costs
2. Include expenses such as rent, utilities, insurance, and administrative salaries
3. Remain relatively constant regardless of business activity levels
4. Must be paid even if the business is not generating revenue
5. Important for calculating the total cost of production and pricing strategies
6. Can be allocated to different departments or products for cost accounting purposes
7. Understanding and managing overheads is crucial for maintaining profitability

Effective control of overhead costs is essential for improving business efficiency and competitiveness.