What is the meaning / definition of Overhead Costs in the hospitality industry?
The term Overhead Costs, also called overhead expenses, refers to the indirect costs which occur when operating a business, while excluding costs directly related to the manufacturing of a product or delivery of a service. Overhead Costs do not directly contribute to the generating of revenue. It refers to all non-labor expenses required to operate your business. Overhead Costs can be fixed, variable or semi-variable.
You can reduce your Overhead Costs by renting equipment, reducing utilities and renegotiating rent contracts. Overhead Costs are all costs on the income statement except for direct labor, direct materials, and direct expenses.
Examples of Overhead Costs are accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities.
- Operating Costs
- FC – Fixed Costs
- VC – Variable Costs
- P&L – Profit and Loss Statement