Which are examples of overhead expenses?

• A. Wages Paid to Employees
• B. Cost of Raw Materials
• C. Sales Commissions
• D. Rent, Utilities, Interior Decorating, and Taxes

Answer: (D)

Overhead expenses are the indirect costs of running the business that support production and operations but aren’t directly tied to a specific product or unit of output. They cover the ongoing needs of the facility and the business as a whole.

Rent, utilities, interior decorating, and taxes fit this pattern because they are costs required to keep the business functioning and the workspace ready, yet they can’t be traced to any single product. They apply regardless of how many items are produced and aren’t allocated to a particular unit.

Wages paid to employees can be direct labor if those workers are directly manufacturing the product, in which case they’re not overhead. The cost of raw materials is a direct cost because it is directly used in producing goods. Sales commissions are selling expenses and fall outside manufacturing overhead; they’re part of operating costs but not overhead tied to production.