What defines "overhead costs" in a business?

Overhead costs are defined as ongoing expenses that are not directly tied to the creation of a product or service. These costs are necessary for the operation of a business but do not fluctuate based on the level of production or sales. They can include rent, utilities, salaries of administrative staff, and general office supplies. Understanding overhead costs is crucial for small business owners as it helps determine pricing strategies and overall financial management. By accurately calculating and managing these expenses, a business can maintain profitability even when production levels vary or when sales fluctuate.