Overhead
Indirect production costs not directly tied to product: factory rent, utilities, depreciation, supervision.
Formula
Total Overhead = Fixed Overheads + Variable Overheads
Real World
Rolls-Royce's Goodwood factory carries enormous overheads — rent, specialist machinery depreciation, and supervisory staff — spread across only ~6,000 cars per year, pushing unit cost very high.
Exam Focus
When calculating overhead absorption rate, always state the allocation basis (e.g. labour hours) — omitting this loses marks.
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