What is Overhead?

Overhead refers to the ongoing operating expenses necessary to running a business, but are not attributed to a specific business activity. Also referred to as 'indirect costs.'

How does Overhead work?

Generally, overhead expenses include expenses that do not directly generate revenues, such as labor and materials, but are needed to maintain the business operations. Overhead expenses include expenses such as accounting, advertising, depreciation, insurance, interest, legal, rent, repairs, office supplies, taxes, information and communications, utilities, research and development, customer relations and service, and travel. These overhead expenses are listed on the company's income statement.

Why does Overhead matter?

Overhead costs are considered fixed costs, that is, they do not rise or fall directly with the cost of goods sold. Overhead costs are important to monitor and control. Since they are not directly related to revenues, they can become a larger share of the total expenses and burden a company, soaking up net income and profits.

Ask an Expert about Overhead

All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Overhead.

Be the first to ask a question

If you have a question about Overhead, then please ask Paul.

Ask a question
Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.