Overhead
 |
Definition of 'Overhead'An accounting term that refers to all ongoing business expenses not including or related to direct labor, direct materials or third-party expenses that are billed directly to customers. Overhead must be paid for on an ongoing basis, regardless of whether a company is doing a high or low volume of business. It is important not just for budgeting purposes, but for determining how much a company must charge for its products or services to make a profit. |
 |
Investopedia explains 'Overhead'For example, a service-based business that operates in a traditional white-collar office setting would have overhead expenses such as rent, utilities and insurance.Overhead expenses can be fixed, meaning they are the same from month to month, or variable, meaning they increase or decrease depending on the business's activity level. They can also be semi-variable, meaning that some portion of the expense will be incurred no matter what, and some portion depends on the level of business activity. Overhead can also be general, meaning that it applies to the company's operations as a whole, or applied, meaning that it can be allocated to a specific project or department. These expenses are typically found on a company's income statement. |
Related Definitions
Articles Of Interest
-
Detecting Accounting Manipulation
"One-time charges" and "investment gains" are two strategies companies can use to distort their numbers. -
Off-Balance-Sheet Entities: An Introduction
The theory and practice of these entities varies greatly. Investors need to learn what they're getting into. -
Intangible Assets Provide Real Value To Stocks
Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value. -
Online Banks: Lower Costs And Little Sacrifice
For many, online banking has become a day-to-day routine. Still, there are some holdouts who refuse to accept the method. -
Doing More With Less: The Sales-Per-Employee Ratio
If used properly, this ratio can give you insight into a company's productivity and financial health. -
Depreciation: Straight-Line Vs. Double-Declining Methods
Appreciate the different methods used to describe how book value is "used up". -
Financial Statement: Extraordinary Vs. Nonrecurring Items
When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ... -
Get A Career In Showbiz Accounting
An accounting career doesn't have to be boring. If you love numbers, but want excitement as well, consider the field of showbiz accounting. -
What Management Accountants Do
If you like keeping track of a company's income and expenses but also want to hold a position with significant responsibility and authority, management accounting could be the job for you. -
The Basics Of A Financial Analysis Report
Running financial analysis on a company or industry is a key skill every investor must learn and understand how to undertake without which an ineffective financial report and investment recommendation ...
Free Annual Reports
