Head office overheads
According to The Code of Estimating Practice, seventh edition, published by the Chartered Institute of Building (CIOB) in 2009, head office overheads are:
| The incidental costs of running a business as a whole. They are ‘indirect costs’ that cannot be directly allocated to production, as opposed to ‘direct costs’ which are the costs of production. Among other things, overheads may include rent, rates, director’s salaries, pension fund contributions and auditor’s fees. In accountancy, head office overheads are generally referred to as ‘administrative expenses’ whereas the direct costs of production are referred to as ‘cost of sales’. The apportionment of head office overheads to individual projects or as a percentage of company turnover is decided by management as part of a management policy. |
--CIOB
NB The Society of Construction Law Delay and Disruption Protocol, 2nd edition, February 2017, published by the Society of Construction Law (UK) defines head office overheads in very similar terms as:
| ...the incidental costs of running the Contractor’s business as a whole and include indirect costs which cannot be directly allocated to production, as opposed to direct costs which are the costs of production. Amongst other things, these overheads may include such things as rent, rates, directors’ salaries, pension fund contributions and auditors’ fees. In accountancy terms, head office overheads are generally referred to as administrative expenses, whereas the direct costs of production are referred to as costs of sales. |
See also: How to calculate head office overheads and profit.
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