Overhead costs are costs that can not be directly allocated to a cost object (such as a salable product or service).
Together with the direct costs they result in cost carrier era, the total cost of a product. Both " direct costs" as well as " overheads " are terms from full cost accounting.
Overheads in terms of cost accounting
Overheads in terms of cost accounting are all expenses incurred in operating costs that are not allocated to the cost object directly. Thus reflect general overhead resources that are required for the manufacturing process. These include, for example, in a multi- product company costs for buildings and for commonly needed equipment. Wages and salaries fall below it, where it can not be assigned to the product. These typically include salaries and wages incurred in the administration or in the warehouse. Similarly to common expenses include the costs of energy supply, if these can not be assigned to the product (eg, for space heating and lighting), and insurance, contributions to organizations or profit- related taxes ( eg property tax ).
Overheads in terms of cost center accounting
For control of overheads, use is usually the cost center accounting, representing the costs of responsibility, as well as mapping the internal cost allocation between cost centers. Furthermore, internal orders as for maintenance or projects in the Cost Center Accounting are integrated. On the individual cost centers both primary costs ( costs of externally purchased services ) and secondary costs incurred by the internal cost allocation, recorded. The costs, which are not related to the output of the cost center are referred to as cost center overheads. Are the costs, however, depends directly on the output of the cost center, it is called single cost center costs.
Method of common costs
Because overhead costs can not be directly attributed to a product, use is made in the costing of various upstream accounting practices for the collection and allocation of costs. These procedures range from a percentage surcharge calculation on the determination of cost rates for individual plants or cost centers using an overhead allocation sheet to process cost accounting.
Loggerhead overheads are theoretically detectable as direct costs and a single product or cost unit attributable. For reasons of economy we can see that from the single collection and analyzes these costs a flat rate. In particular, operating costs for fuel (gas, water) and additives ( lubricants and cleaning agents) are often spurious overheads. As an example, think of screws: One could separately detect each screw in a bill and recorded in use, however the cost of the approach is in many cases disproportionate to the benefits.
Examples: license fees, agent commission, cost of electricity.