Overhead

Definition: Indirect costs that cannot be traced directly to a single product, job, or cost object. Overhead includes items such as factory rent, utilities, de…

Indirect costs that cannot be traced directly to a single product, job, or cost object. Overhead includes items such as factory rent, utilities, depreciation on equipment, and indirect labor. In cost accounting, overhead is allocated (applied) to products using a predetermined rate, and any difference between applied and actual overhead creates a variance (overapplied or underapplied).