What are considered overhead expenses?

Overhead expenses refer to the ongoing costs of operating a business that cannot be attributed directly to the production of goods or services. These costs are essential for maintaining the business infrastructure and supporting the overall operations.

In this context, the combination of rent and utilities represents classic examples of overhead expenses. Rent is the cost associated with occupying business premises, while utilities include essential services such as electricity, water, and heating, which are necessary for day-to-day operations. Both are fixed or semi-variable costs that the business incurs regardless of its output levels.

Other choices may include expenses that do not qualify as overhead. For instance, sales costs and employee salaries specifically relate to direct sales activities or production efforts, making them variable or direct costs rather than overhead. Similarly, inventory costs and sales taxes are linked to the goods sold or services provided, which again distinguishes them from overhead expenses. Thus, identifying rent and utilities as the primary examples of overhead expenses aligns well with the accepted definitions in business operations.