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What is Overhead cost? What are the various ways to classify it?
Overhead Cost is the total of all indirect costs which includes indirect material cost, indirect labour cost, and indirect expenses. These costs are known as indirect costs as they cannot be attributed to any specific business activity. Example: Rent, insurance etc.
There are various ways in which the overheads can be classified:
Element wise Classification:
-Indirect material
-Indirect labour
-Indirect expenses
Function wise:
-Factory Overheads
-Administration Overheads
-Selling and Distribution Overheads
Variability wise:
-Fixed Overheads
-Variable Overheads
-Semi-Variable Overheads
Controllability wise:
-Controllable Overheads
-Uncontrollable Overheads
Normality wise:
-Normal Overheads
-Abnormal Overheads
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