Overhead Costs and Project Costs in Business

Understanding Overhead Costs and Project Costs

Overhead costs such as supervision, administration, consultants, and interest are examples of project costs. These costs are necessary to ensure that the project runs smoothly and efficiently.

As supervision and administration help in managing and organizing the project, consultants bring in specialized knowledge and expertise. Interest is the cost of borrowing money to finance the project. All of these costs should be taken into account when budgeting for a project. Overhead costs, on the other hand, are indirect costs that are incurred in the general operation of a business or organization. They are not directly tied to a specific project but rather support the overall functioning of the company. Overhead costs include expenses like rent, utilities, salaries of non-project-specific staff, office supplies, and general administrative expenses.

While overhead costs are necessary for the smooth operation of a business, they are not considered project costs because they are not directly attributable to a specific project or its deliverables. Project costs are typically accounted for separately and are specifically incurred in the pursuit and completion of a particular project's objectives.