Overhead

Overhead refers to the ongoing business expenses not directly attributed to creating a product or service. It is important for budgeting purposes but also for determining how much a company must charge for its products or services to make a profit. In healthcare, overhead costs can include administrative expenses, utilities, and salaries of non-medical staff.

Definition

Overhead (business) is an accounting term that refers to all ongoing business expenses not including or related to direct labor, direct materials or third-party expenses that are billed directly to customers. It is used in cost accounting to calculate the cost of a product or service.

Types of Overhead

There are three types of overhead: fixed, variable, and semi-variable.

• Fixed overhead costs are costs that do not change with the level of output. These can include rent, insurance, and salaries of non-medical staff.
• Variable overhead costs are costs that vary with the level of output. These can include utilities and supplies.
• Semi-variable overhead costs are costs that have elements of both fixed and variable costs. These can include maintenance costs.

Overhead in Healthcare

In the healthcare industry, overhead costs can be significant. These can include the costs of administrative staff, utilities, and non-medical supplies. It is important for healthcare providers to manage these costs effectively in order to provide quality care while also maintaining financial sustainability.

See Also

• Cost accounting
• Healthcare industry
• Fixed cost
• Variable cost

References

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