Which costs are not directly tied to production but are necessary for daily operations such as lighting, rent, and maintenance?

• A. Overheads
• B. Variable Costs
• C. Direct Costs
• D. COGS

Answer: (A)

Overheads are costs not directly linked to production but are necessary for daily operations. They cover expenses like rent, lighting, and maintenance that keep the business running but can’t be traced to a specific product. These costs can be fixed or semi-variable and are usually allocated across products or time periods.

In contrast, variable costs change with how much is produced, such as raw materials or direct labor tied to specific products. Direct costs are costs that can be clearly attributed to a particular product. Cost of goods sold refers to the total costs of producing the goods that were actually sold, combining direct costs and allocated overhead, not the general overhead itself.