Homonym: Overhead (Expenses)
Overhead refers to the ongoing expenses that a business incurs to operate, which are not directly tied to producing goods or services. These costs can include rent, utilities, salaries of administrative staff, and office supplies. Understanding overhead is crucial for businesses to manage their finances effectively and ensure profitability.
In accounting, overhead is often categorized into fixed and variable costs. Fixed costs, like rent and insurance, remain constant regardless of production levels, while variable costs, such as utilities and office supplies, can fluctuate based on usage. Properly managing overhead helps businesses maintain a healthy bottom line.