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overhead cost
This term refers to the indirect expenses required to keep a business functioning, regardless of how many units of a product are sold or services are rendered. It encompasses fixed costs such as rent, utilities, and administrative salaries, distinguishing them from direct costs like raw materials or hourly labor used for production.
In a corporate or accounting context, the term is used to analyze efficiency and pricing strategies. High overhead costs can signal operational inefficiency or a high barrier to entry for competitors, while reducing overhead is a common goal during economic downturns to maintain profitability.
Meanings
Examples
We need to find a way to reduce our monthly overhead cost if we want to stay profitable.
The rent for the new warehouse is a significant overhead cost for the company.
I wonder if switching to a remote work model would lower our total overhead cost.
How do we calculate the overhead cost per unit produced?
The startup struggled because its overhead cost was too high for its initial revenue.
We must ensure that our pricing covers every single overhead cost.
Our current overhead cost includes electricity, insurance, and administrative salaries.
Our current overhead cost includes electricity, insurance, and administrative salaries.
If we can cut the overhead cost by ten percent, we can afford to hire another developer.
The accountant is reviewing the ledger to identify unnecessary overhead cost.
The accountant is reviewing the ledger to identify unnecessary overhead cost.