What is NOT included in overhead costs?

Overhead costs refer to expenses that are not directly tied to the production of goods or services but are necessary for running a business. These include costs related to administration, facilities, equipment, and utilities.

Raw materials, being essential inputs directly associated with the creation of products, fall into the category of direct costs, rather than overhead costs. These costs can be directly traced to the production process, unlike overhead costs, which support the operational environment but cannot be linked directly to the product creation.

In contrast, employee salaries (for administrative or support roles), utility expenses, and rent for office space are all considered overhead because they support the overall functioning of the business rather than production directly. Understanding these distinctions helps businesses manage their expenses more effectively and identify which costs are variable or fixed in relation to their production activities.