Description: Overhead costs are the ongoing expenses incurred by a business to operate, which cannot be directly attributed to the production of specific goods or services. These costs are essential for the daily functioning of the business and encompass a variety of categories, including office rent, utilities, administrative staff salaries, office supplies, and marketing costs. Unlike direct costs, which are directly related to production, overhead costs are more challenging to assign to a particular product or service. However, they are crucial for maintaining the necessary infrastructure and support for a business to operate efficiently. Proper management of overhead costs is vital for a company’s financial health, as excessive overhead can impact profitability. Therefore, businesses must monitor and control these expenses to ensure they do not exceed a reasonable percentage of their revenue. In summary, overhead costs are an integral part of business accounting, and their proper management can be the key to the long-term success of any organization.
