Answer to Question #240962 in Economics for CCW

Question

Econ. Chp. 4 Vocab:

Make visual notes, acronyms, and symbols to help remember definitions

21) overhead -

22) variable costs -

Answer 1

Overhead costs are expenses of the organization that are not directly related to the main production. These costs are not included in the cost of materials and labor. Production overhead costs are included in the cost of products, works, services in proportion to direct costs.

Variable costs are costs that change as the quantity of the good or service that a business produces changes. Variable costs are the sum of marginal costs over all units produced. They can also be considered normal costs. Fixed costs and variable costs make up the two components of the total cost. Direct costs are costs that can easily be associated with a particular cost object. However, not all variable costs are direct costs.