What is overhead?

Every entrepreneur faces the notion of overhead, but the problem is that at the legislative level and in the tax code, overheads are prescribed only for construction.

Overhead is the mass of the attendantexpenses in the process of production, management and servicing in economic activities. As an example: the maintenance of the vehicle fleet of the organization (fuel, repairs, insurance, salary to the driver) is indirect overhead. Directly, they do not affect the production or management process, but they require significant expenses for the qualitative organization of economic activity.

Talking about what overhead costs, you need to specify the loss from idle time, marriage and penalties.

Composition of overheads

Overhead costs are determined by the costs of the enterprise to create favorable working conditions. They include:

  • Payment of salaries to employees in the sphere of management and framing (office).
  • Payment for communication services (Internet, telephone, fax).
  • Costs for maintaining office space (bills, rent, repair, insurance).
  • Payment of unified social tax of employees.
  • Costs for advertising and PR.
  • Expenses for the use of advisory services.
  • Payments to line staff (in construction).
  • Payments and repayments for the use of loans and leasing.
  • Expenses for repair of production facilities, tools and fleet.

Types of overheads

The types of overhead costs include 4 main groups:

  • The cost of maintaining the management apparatus.
  • Expenses for payment to workers, foremen and masters.
  • Costs for organizing, carrying out work and upgrading.
  • Non-production costs are unplanned costs that have arisen as a result of violations of the rules and rules of production.

Summarized, it can be said that overhead costs -this is the entire amount of costs, the application of which does not apply to the actual production process. The role of overhead costs is to create conditions for the fact of the operation of the enterprise to organize the production process.

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