Overhead Costs

Overhead costs are those cost which have no direct link with production of goods. For example, we take the example of accounting staff in factory. Even production stops due to any case, company has to pay accounting staff because these all are indirect laborer and workers. On the other side, direct laborer are not paid if production is stopped by company. All most all the overhead costs are the fixed cost of business. These costs do not change by changing in output or sale. To make planning to reduce overhead costs is very very necessary for business. Because, these all are fixed cost, it means it directly affects company's working capital position. So, first, we calculate overhead costs per unit and then, try to reduce it.