Indirect overhead

Indirect overhead is any overhead cost that is not part of manufacturing overhead. Thus, indirect overhead is not directly related to a company's production of goods or provision of services to customers. Examples of indirect overhead costs are:

  • Accounting, auditing, and legal expenses

  • Administrative salaries

  • Information technology

  • Office expenses

  • Postage and printing

  • Research and development

  • Telephone expenses

Indirect overhead is charged to expense as incurred. With few exceptions, it is not carried forward into future periods as an asset.

A company intent on improving its reported level of profitability might fraudulently move some elements of indirect overhead into manufacturing overhead, where these elements could be assigned to unsold products, thereby delaying their recognition until a future period.

Related Courses

Activity-Based Costing
Cost Accounting Fundamentals