What does company overhead include?

Company overhead generally refers to the ongoing expenses of operating a business that are not directly tied to producing a product or service. These costs are essential for the functioning of the company and encompass a wide range of operational expenses.

Selecting bonds as company overhead is not correct. Bonds represent a form of debt financing and are associated with borrowing rather than the operational costs incurred in the day-to-day running of the business. They are not classified as overhead since they do not relate to the general costs of maintaining operations.

In contrast, labor costs typically include salaries and wages for employees who contribute directly to the production process and are often not considered overhead if they are specifically tied to production. Equipment expenses can also fall into operational costs but are generally viewed in the context of capital expenditures rather than recurring overhead.

Operational expenses cover a wide range of necessary costs for running a business, such as utilities, rent, office supplies, and salaries of non-production staff, making it the most fitting description of what overhead includes. This is why understanding the breadth of operational expenses is critical to delineating overhead as it encompasses all necessary costs to keep a business running, excluding direct costs linked to production.