What are overheads in a business?

Overheads in a business refer to costs that are essential for the company's operations but are not directly linked to the production of goods or services. These costs typically include expenses such as rent, utilities, office supplies, salaries of non-production staff, and other administrative expenses. Understanding overheads is crucial for businesses, as they must be covered by the pricing of products or services to ensure sustainability and profitability.

The distinction between overheads and direct production costs is fundamental in financial management and budgeting, as it helps businesses allocate resources appropriately and identify areas for cost reduction. By managing overheads effectively, a business can improve its overall financial health and operational efficiency.

In contrast, the other options represent different aspects of business finance. Costs directly associated with production are categorized as direct costs rather than overheads. Profits remaining after all expenses are paid pertain to net income, while investments made for future growth relate to capital expenditures or strategic investments, none of which fit the definition of overheads.