Meaning & use
direct overhead
Last updated
Meanings
nouncountablebusinessfinance
A cost that is directly tied to making a product or running a specific activity, but is not a direct material or direct labor cost.
Grammar: Countable: you can talk about one direct overhead or several direct overheads. Often used in the plural when talking about a group of such costs.
Patterns
- direct overhead costs
- allocate direct overheads to something
- cover direct overheads
The factory's direct overhead includes the electricity used by the production machines.
We need to reduce direct overheads to keep the product price competitive.
The manager separated direct overhead from indirect overhead in the budget report.
noununcountablebusinessfinance
The total amount of such costs for a company or project, considered as a single figure.
Grammar: Uncountable when referring to the total concept: 'Direct overhead is rising.' Do not use 'a' or a plural form in this sense.
Patterns
- direct overhead is high
- increase direct overhead
- reduce direct overhead
Direct overhead has gone up since we added a second shift.
The accountant said that direct overhead should be charged to the project.
They are trying to lower direct overhead without cutting quality.
Word forms
| plural | direct overheads |
|---|
Common combinations
- direct overhead cost
- The direct overhead cost of the new machine includes its maintenance.
- allocate direct overhead
- We allocate direct overhead to each department based on machine hours.
- high direct overhead
- High direct overhead makes it hard for small firms to compete.
- reduce direct overheads
- The company reduced direct overheads by using solar power.
- direct overhead budget
- The direct overhead budget for next year is $50,000.
Synonyms and how they differ
- direct cost
- A direct cost can be traced to a product, such as raw materials; direct overhead is also traceable but is not a material or labor cost.
- overhead
- Overhead is a broader term that includes both direct and indirect costs; direct overhead is only the traceable part.
- prime cost
- Prime cost is direct materials plus direct labor; direct overhead is separate from both.
Opposites
Word family
Commonly confused: direct overhead or indirect overhead?
direct overhead vs indirect overhead
Indirect overhead cannot be traced to a single product, like the salary of a factory manager; direct overhead can be traced to a specific product or process.
Practice
Which sentence uses 'direct overhead' correctly?
Choose one answer.
Direct overhead covers costs like electricity for production that are tied to making the product but are not raw materials. Option 0 is a direct material cost, option 2 is an indirect overhead, and option 3 is a selling or administrative cost, not a production overhead.
Make it your own
Write a sentence using “direct overhead”, then check it and compare it with the examples above.