There are overhead costs in virtually every type of business. What are some of the overhead costs at your company or a company that you are familiar with? Describe some of the overhead costs and see if you can find out how the overhead is calculated, allocated, and applied…or how you think they should be calculated, allocated, and applied.
Often the most difficult part of computing accurate unit cost is determining the proper amount of overhead cost to assign to each product, service or job. Overhead costs are an indirect or common cost that generally cannot be easily or directly traced to individual product or services. Instead, companies use estimates to assign overhead cost to product and services.