What is Overhead? Definition or Meaning

Overhead expenses in a business refer to those costs that cannot be directly associated with a product or service. Think the rent you pay for your business location, the utilities bill, travel costs, telephone bills or lunch and office stationery costs. They could add up to a significant sum!

For example…

Consider a lighting showroom. They would have a high overhead expense on utilities as they need electricity to demonstrate the various lights they sell. The company would also have sales staff, who might be paid by the hour and even if they don’t manage to sell anything, their salary would be an overhead too.