overhead cost

In accounting, overhead costs are expenses that are not directly tied to the production of a specific product or service. These are also referred to as indirect costs. Examples include factory rent, utilities, and supervisor salaries.123

Cost finding is the process of estimating these costs. Methods like process costing and job-order costing are used to assign costs to products. Job-order costing distinguishes between prime costs (direct materials and labor) and overhead costs. Overhead costs are often assigned using predetermined overhead rates, which are ratios of total overhead to production volume. Activity-based costing identifies specific activities that drive costs and estimates costs per unit of activity. These methods help businesses understand their total production costs for better planning and decision-making.3