This article defines what is overhead and the type/classification of overheads
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Definition Of Overheads: |
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Overheads are costs which do not relate solely to the cost units and must be shared equitably between them.
Examples of overheads are indirect material cost, indirect labour and indirect expenses. |
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Types of Overheads |
Description |
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Production overheads |
Relates to those indirect costs incurred to produce the products Examples: indirect materials, indirect wages, factory rent and factory insurance and factory depreciation of plant and machinery |
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Administration overheads |
Relates to those costs on office/administrative supports. Examples: office salaries, stationery, office rent, office maintenance, audit fees |
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Selling overheads |
Relates to those costs on the selling of the products Examples like salesmen’s salaries, commissions, incentives and traveling expenses. |