Tuesday, August 7, 2012

What is the difference between overhead expenses and operating expenses?Can operating expenses be classified as overhead expenses

A businesses expenses are split into two categories because operating expenses apply exclusively to the costs incurred in the connection with a product or service.



"All of the costs associated with production itself, including engineering, warehousing, energy, maintenance, and the like—and not least labor and raw materials costs—are accounted for as operating expenses."



While overhead expenses are administrative expenses such as salaries, rent, utility bills, insurance, travel expenses, benefits to employees.  Overhead costs are usually more constant in their value, while operating expenses tend to fluctuate depending on the product or service that the company provides.

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