What is Overhead?

Legal Definition
In business, overhead or overhead expense refers to an ongoing expense of operating a business; it is also known as an operating expense. Overheads are the expenditure which cannot be conveniently traced to or identified with any particular cost unit. Therefore, overheads cannot be immediately associated with the products or services being offered, thus do not directly generate profits. However, overheads are still vital to business operations as they provide critical support for the business to carry out profit making activities. For example, overhead costs such as the rent for a factory allows workers to manufacture products which can then be sold for a profit. Such expenses are incurred for output generally and not for particular work order; e.g., wages paid to watch and ward staff, heating and lighting expenses of factory, etc. Overheads are also very important cost element along with direct materials and direct labor.

Overheads are often related to accounting concepts such as fixed costs and indirect costs.

Overhead expenses are all costs on the income statement except for direct labour, direct materials, and direct expenses. Overhead expenses include accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities.

There are essentially two types of business overheads. Administrative overheads and manufacturing overheads.
-- Wikipedia
Legal Definition
1. A resource that is used up during a process, that is not part of the finished product. 2. Accounting: An expenditure or cost that (1) is related to either a specific operation or to the entire firm, (2) does not go on to become an important component of the merchandise and services offered, and (3) has no direct relationship to a particular output. 3. Data communications: The addition of data bits to data that is transmitted by the user, which aids in the transmission of information and sending out instructions related to the operations. 4. Utilities: The loss of energy or water incurred during the transmission of power from the power production plant to the house of the consumer.