How to Calculate Overhead
Overhead costs are the expenses paid to keep your business running, whether you are in high demand or barely producing a product. Having a solid record of your overhead costs will help you set a better price for your product or service, show where you can save money, and illuminate ways to streamline your business model. But these benefits only come from careful bookkeepers, so read on to figure out the best way to calculate your business's overhead costs. 1. Finding Your Overhead Costs a. Understand that overhead costs are expenses that do not directly relate to your product. They are also known as indirect costs. Indirect costs are things like rent, administrative staff, repairs, machinery, and marketing costs that are essential to your business operations and must be paid regularly. In our example, indirect costs such as postal rates and insurance are necessary to run a business, but not making a product. b. Know that direct cost is the ...