1. Overhead cost is the cost that is not directly related to the production process but is related to the management and factory general operation.
2. Overhead cost includes:
(a) indirect salary, that is, salaries paid to factory executives, factory engineers, managers, and factory supervisors. These employees are involved in the factory general operation and they are not directly involved in the production
(b) factory rental
(c) factory insurance
(d) factory payment rate
(e) repair and maintenance of plant and machinery
(f) depreciation of plant and machinery
(g) depreciation of small tools in the factory
(h) factory land tax
3. In general, the overhead cost is fixed cost. However, there is still some exception. For example, electrics payments will increase as production increases as a result of using more machines.
