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[edit | edit source]
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[edit | edit source]
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[edit | edit source]
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[edit | edit source]
References[edit | edit source]
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