[eng, biz] ISO a word for a kind of business expense

[siderea]

I don't quite know how to go about googling for this. I'm looking for a technical term in business, accounting, finance, tax law, economics or other jargons, that refers to a specific sub-species of what may or may not be "overhead" expenses. Let me describe what I'm looking for.

Overhead in general means: all ongoing business expenses not

Comments

[rmc28]

Phone calls from my landline have a "connection charge" - a minimum amount to pay and then the charge per minute.

My power company has a "standing charge" per quarter I remain their customer, covering the basic business of supplying, metering, and billing me.

Is this the kind of thing you're thinking of? Would "setup costs" work to describe it?

[nuclearpolymer]

Interesting. I see what you mean.

In a business where there are expenses directly caused by a specific customer, but where those expenses are not billed to the customer, that type of expense needs a different name to distinguish it from the type of expenses which exist independent of any particular customer. In certain types of business, they just rarely or never directly bill a specific customer for such expenses because that is just not their pricing model.

I would categorize those as 'expenses incurred in support of a specific customer but which are not recoverable from said customer' but I do not know a legal or business term for it. Like, a McDonald's doesn't charge a customer extra if they get extra ketsup, but they do charge more for a cheeseburger than a hamburger, but that shouldn't mean that cheese is not overhead and ketsup is overhead.

[siderea]

YES! That, exactly. Beautifully put.

[kelkyag]

In that particular case, could cheese and ketchup and all other ingredients be classified as supplies one orders (or tries to) in proportion to how much business one is doing, but as extras are cooked and/or use-by times expire, not all use of them is accounted to particular customers, and they effectively are all overhead? Or does one account the cheese that goes on ordered burgers toward profit-making activity, and the cheese that passes its use-by date and is discarded or donated toward overhead?

... maybe my reading up on accounting is in order before asking more questions.

[siderea]

I think you have missed the point.

We're not having the discussion of how you classify things. We're having the meta discussion of what you call the classes into which you classify things.

[kelkyag]

Having and insuring the car soas to get to and from gigs is a necessary expense not tied to a particular gig -- legit overhead -- and from there I suspect it's not so hard to put all the car expenses in a single category and call it good.

The allowance for overhead costs that vary with the amount of business suggests that "overhead" which is more or less directly related to profit-making business is sometimes acceptable.

I don't know enough about business accounting & taxes to understand why filing a cost as overhead rather than directly related to a specific bit of business would matter, as long as all the profits and costs are reported ...?

[siderea]

Well, as in all things, the question is matter to whom?Here's an example: IIRC, techjob was required by NSF accounting requirements to classify all computer expenses, including all computer support expenses, as overhead. Techjob had different departments that had their own revenue streams - same as any corp with multiple lines of business. But some of those departments had digital products and programmers and web designers - and required hardware, and networking, and IT support - and some of them did not. But the way overhead expenses were covered, as is standard for grant-funded educational non-profits, is that each department serving a grant was charged an "overhead rate", which is N% of the amount of the salary of each employee working on the grant, charged against the money from the grant

[kelkyag]

the question is matter to whom?

That is exactly what I was missing (thinking only of taxes and internal accounting) thank you, and apologies for putting you to the trouble of a long -- but much appreciated! -- explanation. (The whole bid/apply-and-grant process sounds like an incredible headache with massive overhead ... but taking out that overhead seems like one'd wind up with an even higher fraction of grants going to shiny-looking proposals with nothing backing them up.)

[indicolite]

Sounds like "absorbed overhead" is the kind of overhead that is transferred to the price of each product without being explicitly billed as a direct cost of the product.

http://www.accountingtools.com/questions-and-answers/what-is-overhead-absorption.html

However, "unabsorbed overhead" seems to be defined as "Indirect cost that can't be spread to a few customers but must be spread over all customers according to a measure of volume."

So I am slightly confused as to which one is closer to the description you want, but I'd start with looking at those two.

[siderea]

A-HA! That sounds right on target, I'll check it out. Thanks so much!