Overhead costs may be defined like the net cost of indirect materials, indirect expenses and indirect labour. They may happen or be charged to as:
a) Production cost centers that is making and packing and finishing departments.
b) Service costs centers as an example of power generation and maintenance
c) Other non-production cost centers as an example of administration and distribution and selling
In this section, we will look at how these overhead costs are changed to non-production and production departments then to determine the total cost incurred via every department in the organization.