Indirect overhead definition
/What is 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
Examples of indirect overhead costs are as follows:
Accounting, auditing, and legal expenses
Administrative salaries
Information technology
Office expenses
Postage and printing
Research and development
Telephone expenses
Related AccountingTools Courses
Accounting for Indirect Overhead
Indirect overhead is charged to expense as incurred, because it is nearly always classified as a period expense. With few exceptions, it is not carried forward into future periods as an asset.
Fraudulent Use of Indirect Overhead
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. Auditors can spot this fraud by tracing the journal entries used to shift indirect overhead costs into manufacturing overhead cost pools.