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A businesses expenses are split into two categories because operating expenses apply exclusively to the costs incurred in the connection with a product or service.
"All of the costs associated with production itself, including engineering, warehousing, energy, maintenance, and the like—and not least labor and raw materials costs—are accounted for as operating expenses."
While overhead expenses are administrative expenses such as salaries, rent, utility bills, insurance, travel expenses, benefits to employees. Overhead costs are usually more constant in their value, while operating expenses tend to fluctuate depending on the product or service that the company provides.
All those expenses incurred apart from direct labor and direct material in a factory during production are known as overhead expenses. Overhead expenses include all types of indirect labor indirect material and all such expenses incurred during production, while Operating expenses are all those which are incurred during operation of the business including administrative, general and marketing expenses. Moreover, operating expenses are period costs incurred during a certain period of time while overhead expenses are product costs incurred for the production of goods. Therefore we can say that operating expenses cannot be classified as overhead expenses.
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