general and administrative expenses manufacturing overhead

Variable overhead costs are costs you incur on a regular basis with costs that fluctuate. No matter how your business is performing, or what kinds of crazy market forces are at work, you’ll pay the same amount for rent every single month. The rent for your bakery is the same amount every month. There are three types of overhead: fixed costs, variable costs, or semi-variable costs. Theoretically, if the company didn’t have any projects in the works, they could let her go and not incur the expense.įixed, variable, and semi-variable overhead For example, a construction company might have a manager that oversees all of the projects the company is currently working on. Overhead expenses relate directly to the product or service the business produces, but not to one specific project. The business has to pay these indirect costs even if they aren’t currently working on any projects. For example, the business might have general liability insurance, a business license, HR employees, office supplies, accounting and legal fees, bank fees, etc. G&A (general and administrative) expenses are expenses that apply to the whole company, and don’t necessarily have anything to do with essential business activity-the product or service the business creates. In other words, overhead is a type of operating expense. Operating expenses is a broad category, encompassing everything you spend in the course of running your business. While overhead covers everything required to stay in business, operating expenses includes both overhead and COGS/COS. When it comes to categorizing the ways you spend money, there’s an important distinction between overhead and operating expenses. These costs are not directly related to the way your bakery makes money, but they do keep your business running. However, rent for the bakery, business insurance, the cost of hiring an accountant, assorter administrative costs-all of these are overhead. Both these expenses are directly related to your business-you incur them in the process of making money. When you pay insurance for your bakery’s delivery van, that’s COS.

When you buy ingredients for the croissants at your bakery, that expense is included in COGS. These expenses are called COGS (cost of goods sold) and COS (cost of services), respectively. However, that doesn’t include what you spend to produce goods or provide services, typically on raw materials and direct labor. Overhead is what you pay to keep your business in business.

General and administrative expenses manufacturing overhead