overhead costs

Meaning

Overhead costs, often just called 'overhead,' are the ongoing expenses of operating a business that cannot be directly linked to creating a specific product or service. These include rent, utilities, insurance, and administrative salaries. Managing these costs is crucial for maintaining a healthy profit margin.

Examples

• Renting a smaller office space helped the startup significantly reduce its overhead costs.

  Renting a smaller office space helped the startup significantly reduce its overhead costs.

• Even if we don't sell a single product this month, we still have to cover our overhead costs.

  Even if we don't sell a single product this month, we still have to cover our overhead costs.

• Marketing expenses are part of our overhead costs, but they are essential for attracting new clients.

  Marketing expenses are part of our overhead costs, but they are essential for attracting new clients.

• The board of directors is looking for ways to cut down on administrative overhead costs.

  The board of directors is looking for ways to cut down on administrative overhead costs.

• High overhead costs can make it difficult for a small retail business to survive its first year.

  High overhead costs can make it difficult for a small retail business to survive its first year.

Common Mistakes

• ✗ We spent a lot of overheads costs on raw materials this week.

  ✓ We spent a lot on raw materials, which are direct costs, not overhead costs.

  Raw materials are direct costs because they go directly into making the product. Overhead costs are indirect operational expenses like rent or insurance.

• ✗ Our overhead cost is very high.

  ✓ Our overhead costs are very high.

  Use the plural 'overhead costs' or the singular collective noun 'overhead' (without 'costs') to describe these general expenses.

Related Expressions

Practice

• The company decided to go fully remote to eliminate office rent and lower its ___.

  💡 Ongoing operational expenses not tied to production.

  Show answer

  overhead costs

• We need to calculate our monthly ___ before we can determine our break-even point.

  💡 Plural term for indirect expenses like rent, utilities, and insurance.

  Show answer

  overhead costs