Global HR Glossary

What is Overhead Cost? 

Overhead cost refers to the ongoing, indirect expenses associated with running a business that are not directly linked to the creation of a product or service. These costs are essential for the day-to-day operations but do not directly generate revenue.

Types and Management of Overhead Costs

• Fixed Overhead Costs: Expenses that do not change with the level of production, such as rent, salaries, and insurance.
• Variable Overhead Costs: Expenses that vary with production volume, like utility costs and office supplies.

Effective management of overhead costs involves monitoring expenses regularly, optimizing operations, and making strategic decisions to maintain or reduce overhead without compromising business efficiency or growth. Managing these costs effectively is crucial for maintaining profitability and ensuring the long-term sustainability of the business.