Classification of Overheads: Administrative, Selling and Distribution

## Classification of Overheads (AOH, SOH, DOH)

Overheads in a cost sheet are grouped by the function they serve. After factory/production overheads come three downstream categories.

### F. Administrative Overheads (AOH)

Costs of the general administration of the entity — running the business as a whole, not making or selling a specific product. Typical items:

• Depreciation and maintenance of building, furniture etc. of the corporate / general management.
• Salary of administrative staff — accountants, directors, secretaries etc.
• Rent, rates & taxes, insurance, lighting, general office expenses.
• Indirect materials — printing & stationery, office supplies.
• Legal charges, audit fees, directors' sitting fees, remuneration & commission, meeting expenses.

> Doubt Buster: Bank charges are treated as Administrative Overhead.

### G. Selling Overheads (SOH)

Costs incurred to create demand and secure orders — related to the sale of products/services:

• Salary & wages of the sales department and staff directly engaged in selling.
• Rent, depreciation, maintenance and other costs of the sales department.
• Advertisement, maintenance of website for online sales, market research.
• Secondary packing cost — packing that helps store, transport, inform the customer, promote and make the product marketable.

### H. Distribution Overheads (DOH)

Costs of making goods physically available to customers (post-sale logistics):

• Salary & wages of staff engaged in distribution.
• Transportation and insurance of goods in distribution.
• Depreciation, hire charges, maintenance and operating costs of distribution vehicles.

### Quick way to remember