OVERHEADS COST Meaning and
Definition
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Overhead cost refers to the expenses incurred by a business that are not directly traceable to a specific product or service, but are necessary for the overall operation of the company. These costs are typically incurred in order to facilitate the production and sale of goods or services.
Overhead costs can include expenses such as rent or mortgage payments for business premises, utilities, insurance, office supplies, salaries of administrative staff, and costs associated with maintaining and operating equipment and facilities. They are essential for the day-to-day functioning of a business and include both fixed and variable expenses.
Fixed overhead costs are those that do not fluctuate significantly with changes in the level of production or sales, such as rent or insurance payments. Variable overhead costs, on the other hand, are directly related to the level of production or sales and can vary accordingly, such as the cost of raw materials or utilities.
Understanding and managing overhead costs is crucial for businesses as they are a part of the total cost of production and can affect the profitability of the company. Effective cost control measures and budgeting strategies are often employed to minimize and optimize overhead costs, ensuring that they do not exceed the revenues generated by the business.
In summary, overhead costs are the various expenses necessary for the ongoing operations of a business that are not directly attributable to a specific product or service.
Common Misspellings for OVERHEADS COST
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Etymology of OVERHEADS COST
The term "overheads cost" essentially combines two words: "overheads" and "cost".
The word "overheads" refers to expenses or costs that are not directly attributed to a particular product or service but are necessary for the operation of a business. These expenses can include rent, utilities, salaries, maintenance, and other miscellaneous costs.
The term "cost" refers to the amount of money required to produce or obtain something. In the context of business, it typically refers to the expenses incurred in the production or operation of a company.
Therefore, the term "overheads cost" is used to describe the expenses or costs that are associated with the overheads of a business. It is the total amount of money required to maintain the necessary resources and operations that do not directly contribute to the production of individual products or services.
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