overheadIN

Overheadin is a term sometimes found in informal accounting and budgeting discussions to describe the practice of identifying, accounting for, and allocating overhead costs to cost objects such as products, services, or projects. The term is not part of formal accounting standards and its meaning can vary, but it generally centers on how indirect costs are identified and incorporated into pricing, budgeting, or financial reporting.

In common usage, overheadin encompasses methods for assigning overhead, including traditional overhead absorption, activity-based costing, and the use of overhead rates. Practitioners may apply a predetermined overhead rate to direct costs or allocate overhead based on activity drivers. The aim of overheadin is to arrive at more accurate product or project costs and to reflect the resources used to support operations beyond direct materials and labor.

Example: If a manufacturer uses a 20 percent overhead rate on direct labor, a job with $100 of direct labor would incur $20 of overheadin, yielding a total cost of $120. In pricing and budgeting, overheadin can influence decisions about product mix, pricing strategies, outsourcing, and efficiency improvements.

Because overheadin is informal and not standardized, readers should seek explicit definitions in documents where it appears. It is related to but distinct from general overhead, overhead allocation, and cost accounting practices such as activity-based costing and standard costing. See also cost accounting, overhead, overhead rate, and budgeting.