Overhead are the indirect expenses of a company related to the day-to-day running of the business, and not attributable to any specific job, service, or product. In other words, they are expenses that a business will incur whether they are making money or not. Rent, utilities, marketing and advertising costs, and the pay for office personnel are all examples of overhead.
EXAMPLE:
Gross Income – Money for a job(s)
Cost of Goods Sold – Money to deliver the job
Gross Profit – Money left over after the job is delivered. GI – COGS = GP
Overhead – Money spend on indirect expenses to run a business
Net Profit – Money left over after all expenses are paid or GP – OH = Net Profit
Subtract the overhead from the gross profit to figure the net profit.
