What is the common term for indirect costs?

Indirect costs are often referred to as overhead costs and are expenditures that cannot be directly traced to a specific product, project, or department. These costs encompass expenses such as utilities, rent, administrative salaries, and other general expenses that support the overall operations of an organization.

While direct costs can be directly attributed to a specific project or product (like raw materials or labor specifically for that project), indirect costs are allocated across multiple projects or departments. Indirect costs are critical for financial management as they contribute to the total cost of doing business, and they must be accounted for to obtain a comprehensive understanding of financial performance.

Understanding indirect costs helps organizations in budgeting, pricing, and financial reporting, ensuring that they can allocate resources effectively and understand the true profitability of their operations. The option that names these costs directly as "indirect costs" is the most precise and reflects standard terminology in accounting and finance.