Research overhead is the cost of searching for new products, new techniques for production or finding new equipment. Running expenses of delivery van, wages of packers, carriage and freight outwards, rent, rates and insurance of warehouses and the like are some of the examples of distribution overhead. The term distribution refers to the activities relating to the sequence of operation starts from making the packed product available for dispatch and ends with making reconditioned returned empty package available for reuse.ĭistribution is also one of the functions like manufacturing, administration and selling.

Salaries, Commission and traveling expenses of sales representatives and executives, advertising and publicity expenses, samples, printing of price lists, discounts, rebates, bad debts and the like are the examples of selling overhead. The selling overhead refers to the cost of selling function ie the cost of activities relating to create and stimulate demand for company products and to secure orders. The printing and stationary for administration, rent, rates, insurance of general office, bank charges, telephone, postage, and the like are the examples of administration overhead. Hence, such service expenses are treated as administration overhead. In other words, administrative services are necessary for the effective operation of any business. The general functional expenses are included in the administration overhead.

The term administration refers to the formulation of policy, direction, control and management of affairs. Factory rent, rates, lighting, heating, idle time wages, depreciation of factory, building, plant and machinery, canteen expenses and the like are some of the examples of production overhead. All the indirect expenses, which are incurred in the factory premises in connection with the production of any goods and services, are treated as production overhead. It is otherwise called as manufacturing overhead, works overhead and factory overhead. The overheads can be classified into in the following ways on the basis of function wise classification. 4 Control wise classification of overheadsįunction wise classification of overheads.3 Elements wise classification of overheads.2 Behavior wise classification of overheads.1 Function wise classification of overheads.

Overhead cost examples