What Is Overhead?
Ongoing business costs not directly tied to producing a specific product or service.
Detailed Explanation
Includes rent, insurance, administrative salaries, and utilities. Overhead must be factored into pricing to ensure invoiced rates cover true costs.
Example
A freelancer calculates $1,500 monthly overhead to ensure hourly rates cover more than just direct labor.
Why It Matters
Underestimating overhead leads to pricing too low and eroding profitability.
Related Resources
Related Accounting Basics Terms
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