The fixed costs of a manufacturing facility include lease or mortgage payments, salaries for permanent employees, benefits and insurance. Direct costs include only the labor and materials directly involved in the manufacturing process. The rest of the expenses related to manufacturing are categorized as being indirect costs. As production increases, indirect expenses are also expected to increase, with the potential of being offset to a degree by economies of scale. Examples of increasing indirect costs include additional labor required for quality assurance, hiring staff for phone and e-commerce sales, and shipping and handling goods.
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