Understanding Overhead
Overhead costs are routine expenses a business incurs that aren't tied to producing or selling services or goods. They must be paid regardless of the business's profitability. For example, a business must pay rent for its retail space even if no products are sold.
Overhead Breakdown
Overhead costs are necessary for a business to operate, including rent, utilities, and insurance. Tracking these can impact business profitability. Overhead expenses are subtracted from revenue to calculate net income, a key indicator of business profitability.
Overhead Categories
- Fixed Overhead
- Variable overhead
- Semi-variable overhead
Overhead Examples
- Administrative Overheads
- Rent and Utilities
- Employee Perks
- Sales and Marketing
- Research and Development