Overhead

Overhead costs encompass the expenditures that a business incurs to maintain its operations and keep its doors open on a daily basis. These costs are not directly associated with the production or sale of goods or services but are essential for the ongoing functioning of the business. In contrast to operating expenses, which are directly linked to the production or sale of goods and services, overhead costs are not directly proportional to revenue. In other words, overhead costs must be covered even when the business is not generating any profit.