overhead

(noun)

Any cost or expenditure (monetary, time, effort or otherwise) incurred in a project or activity, which does not directly contribute to the progress or outcome of the project or activity.

Related Terms

Examples of overhead in the following topics:

  • Inputs to COGS

    • Costs of goods made by the business include material, labor, and allocated overhead.
    • Costs of payroll taxes and employee benefits are generally included in labor costs, but may be treated as overhead costs.
    • Determining overhead costs often involves making assumptions about what costs should be associated with production activities and what costs should be associated with other activities.
    • Variable production overheads are allocated to units produced based on actual use of production facilities.
    • Fixed production overheads are often allocated based on normal capacities or expected production.

  • Income Statements

    • It includes material costs, direct labor, and overhead costs (as in absorption costing), and excludes operating costs (period costs), such as selling, administrative, advertising or R&D, etc.

  • Pro Forma Income Statement

    • It includes material costs, direct labour, and overhead costs (as in absorption costing).

  • Present Value, Multiple Flows

    • The new product will have start-up expenditures, operational expenditures, and then it will have associated incoming cash receipts (sales) and disbursements (Cash paid for materials, supplies, direct labor, maintenance, repairs, and direct overhead) over 12 years.