ECONOMICS

Detailed explanation-1: -Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department. Indirect expenses are also known as overheads. Overhead is actually the total of: Indirect materials.

Detailed explanation-2: -Overhead costs, also called “overhead expenses” or “operating expenses", are expenses associated with running a business that can’t be linked to creating or producing a product or service. They are the expenses the business incurs to stay in business, regardless of its success level.

Detailed explanation-3: -What is a Product Cost? Product cost refers to the costs incurred to create a product. These costs include direct labor, direct materials, consumable production supplies, and factory overhead. Product cost can also be considered the cost of the labor required to deliver a service to a customer.

Detailed explanation-4: -What would not be used as the basis for allocating expenses to departments? E-mail would not be used as the basis for allocating expenses to the department.

Detailed explanation-5: -Overhead can be classified according to function-wise as manufacturing o/h, administration o/h and selling & distribution o/h.