Talk:Overhead (business)/Archives/2014

Common business term

I've added this stub because this is a common business term with a specific meaning in business. I realize there's a heavy overlap with fixed costs, but the term overhead has common use in business, and I can't find it clearly defined anywhere in Wiki for someone who hasn't the foggiest idea what it means. SueHay 02:58, 15 February 2007 (UTC)

im sorry but it should remain seperate —Preceding unsigned comment added by 195.188.180.1 (talk) 16:40, 7 November 2007 (UTC)

I disagree. Overhead and fixed costs are common, yes; however, overhead refers specially to costs for maintaining property and fixed costs do not change with volume of sales. If any changes should be made, overhead should become a subcategory of fixed cost. Sources: Fixed Cost definition Overhead Cost definition -Sp0rk.me.with.a.knife (talk) 00:44, 24 March 2008 (UTC)

I think the articles need to be kept seperate, if only because overhead has several meanings. AnthonyUK (talk) 21:15, 22 April 2008 (UTC)

What is included in overhead

I work for a dentist and we have started a bonus program. Our first bonus was given in May this year with 2 employees eligible. The overhead at that time was approx. 28000.00. Since then an additional employee is eligible and since may our overhead has jumped to 48000.00 we were recently informed that the dentist income is included in our overhead. I am the office manager and the employees have come to me with this issue. Im not being ugly but the dentist is very tight and im beginning to wonder if i can trust him with this. I dont feel like he tracks this completely and the only thing he goes by is his bank statment and as you can see the overhead is a ridiculous amount. How do I approach him without overstepping my boundries so that we can be confident that this is being done correctly. Ive always heard that your overhead should not be more than a 3rd of your collections is this correct and should he be putting his income in the overhead what exactly should be in the overhead. I NEED HELP!! (24.174.229.156 (talk) 16:41, 6 September 2008 (UTC))

Should R&D be considered an overhead, even though it can be capitalized?

I work for a bank and this term is in its budget. I would like to point out that in the definition it is said Overhead cost=Op. expensens-(rent+...) and after few lines in an example there is written that rent is an overhead cost. Which one is correct? — Preceding unsigned comment added by 46.14.190.252 (talk) 14:00, 6 December 2011 (UTC)

R&D is likely not overhead as it is an expenditure that is not critical to maintaining continued operation. — Preceding unsigned comment added by Onionmon (talk • contribs) 2011-12-16T18:46:05

I think maybe the answer should rightfully depend on the industry, but that "should" doesn't necessarily mean that accountants would do it that way. The pharmaceutical industry is one in which a company must always be engaged in an ongoing, permanent, never-ending R&D program, unless the company acknowledges and accepts that otherwise it will gradually become (nothing other than) a commodity manufacturer within 20 years, with all that goes along with that (razor-thin margins; near-perfect competition; thus, by corollary, squeezing stones for a nickel; scouring the Earth for the lowest-wage places to try to move production to while also not spending hardly any money on the move or the training; no investor attraction, because investors want big growth potential) ... Thus, I would argue that in the pharmaceutical industry, R&D is functionally equivalent to an overhead expense. The same seems true of the IT hardware manufacturing industry. However, I am not an accountant, and I don't think my brain is cut out for the peculiar thinking that makes good accountants or lawyers (that is, a certain facility for conflating arbitrary thresholds with logical inevitability, or at least pretending that one is the other because a paycheck depends on it). So my opinion here is probably not worth much more than a chuckle. But in pharma or IT hardware, R&D is critical to maintaining continued operation, over the scale of years (not months). ¶ However, most industries probably don't ride that treadmill nearly as fast, so my line of thought wouldn't apply as well to those. Also, one more thought: overhead has a "cost-of-goods-sold" kind of feel to it; it's "what you spent in order to be able to make that particular widget that you just sold last week." Does R&D spending from 7 years ago "count" as "spending that went into building that particular widget last week"? Most accountants and lawyers would say "no" (unless winning their case and getting money meant arguing the opposite, in which case, they would very flexibly provide good arguments for "yes"...). But I would say that the real, true, objective, disinterested answer is "yes", because without buying that R&D 7 years ago, last week's production could never have happened. ¶ Perhaps the best way to answer the question is to operationally define overhead on an essentially arbitrary class of time scales. Perhaps only fixed costs that were incurred within the past 1 or 3 or 18 months—such as last month's electricity bill or natural gas bill, last month's raw material invoices, last month's payroll, and so on—should "count" as "overhead" nominally. Perhaps fixed costs that are equally as inevitable as those other costs, but are more remote in time scale—such as an R&D project done today that ensures continued viability of business model 7 years from now—should arbitrarily be considered as "not overhead". But yet it is nevertheless entirely likely that they were critical to maintaining continued operation, from the bird's-eye view of the calendar (on a scale of multiple years). I don't know, maybe if I went to accounting school I would find this addressed in accoutancy 101. Any accountants here to drop some knowledge? — ¾-10 19:52, 18 December 2011 (UTC)

Wages are not direct labor?

I wonder if it's a contradiction to say in the beginning of the article that "wages" are an example of overhead expense, then in the second paragraph say that overhead expense is NOT "direct labor". Forgive me if I am benighted or treading on toes. 99.23.82.195 (talk) 04:16, 25 July 2013 (UTC)