A cost is classified as an overhead cost if it is not directly traceable to an end product or a cost object.

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Overhead costs are indirect costs that cannot be easily assigned or traced to a specific product or service. Examples of overhead costs include rent, utilities, insurance, and salaries of administrative staff. These costs are generally incurred for the overall benefit of the organization rather than for a specific product or service, and are allocated based on a predetermined methodology.

A Cost Is Classified as an Overhead Cost If It