What do you mean by overhead? State any two examples.
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Explanation:
Definition: The indirect costs or fixed expenses of operating a business (that is, the costs not directly related to the manufacture of a product or delivery of a service) that range from rent to administrative costs to marketing costs. Overhead refers to all non-labor expenses required to operate your business.
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The answer is stated below:
Explanation:
- Overhead costs are the costs which is indirect, which means that can not be traced back to the particular product as well as administrative expenses, which do not generate revenues. The cost of overhead does not comprise of the direct expenses, direct labor as well as direct materials.
- In short, the overhead is defined as the activities which are not related directly to the services and the products which the firm offers or provides.
- For example, paying the rent for the building, which is not the activity of making profit but it allows the business for maintaining the building as well as manufacture its products.
- 2nd example- A high end clothier need to pay a substantial amount for rent, which is a kind of overhead, so that to be located in facility for the clothes sales.
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