Fixed overhead includes expenses that are the same amount consistently over time. These can include rent and depreciation on fixed assets. Variable overhead expenses include costs that may fluctuate over time such as shipping costs.

Is depreciation included in overhead costs?

In the production department of a manufacturing company, depreciation expense is considered an indirect cost, since it is included in factory overhead and then allocated to the units manufactured during a reporting period. The treatment of depreciation as an indirect cost is the most common treatment within a business.

What is included in overhead?

Overhead expenses are what it costs to run the business, including rent, insurance, and utilities. Operating expenses are required to run the business and cannot be avoided. Overhead expenses should be reviewed regularly in order to increase profitability.