Overhead Definition

Overhead refers to the indirect costs of running a business. This can include items like office supplies, utilities, insurance, and employee salaries. Indirect costs are those that cannot be directly tied to the production of goods or services.

Overhead is often expressed as a percentage of the direct costs of production. For example, if the direct costs of production are $100 and the overhead costs are $10, then the overhead rate would be 10%.

The term ‘overhead’ can also refer to the amount of money that a company spends on non-production related activities. This can include marketing, research and development, and administrative expenses.