Overhead

Overhead supports multiple activities rather than being directly traceable to one product or order. General administration and shared premises are examples. Item-level results may allocate these costs using a defined basis.[2][1] Overhead is not identical to fixed costs: direct versus indirect and fixed versus variable are different classifications.

Decide whether occupied warehouse space or order count provides a useful allocation basis. Document the method and, where helpful, also show contribution before overhead. Otherwise removing an item may appear to save expenses that actually remain elsewhere in the business.