Question

Overhead expenses always included in sp or cp or profit or loss

Answer 1

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Overhead Expenses always included in c.p.(cost price】

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Answer 2

The production or sale of a particular product is not directly related to overhead costs, which are indirect costs of operating a business. Rent, utilities, insurance, administrative staff salaries, and other recurring costs are a few examples of overhead expenses.

Overhead costs are included in the cost of production when determining the cost of goods sold (COGS) (COP). The COP includes both direct costs like those for labor, raw materials, and manufacturing as well as indirect costs like those for overhead. The total cost of producing and selling the goods is the cost of goods sold.

The selling price (SP) or cost price (CP) of a product does not include overhead costs. While the cost of production or acquisition is the CP, the selling price, or SP, is what is charged to customers. Both the SP and the CP exclude overhead costs because they have no direct bearing on the cost of a product.

In order to determine the net income or profit, operating expenses, including overhead costs, are deducted from the revenue. The business experiences a loss if overhead costs exceed revenue. On the other hand, if revenue exceeds overhead costs, a profit is made by the company.

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