Is Indirect labour cost counting towards overhead?


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    Rebekka O'Melia

    Indirect expenses and overhead are the same thing. Things like employee benefits, health insurance, training, and rent are all indirect expenses.

    The salary of employees is a direct expense.  The direct and indirect expenses + PROFIT = Total Revenue.

    One thing that often makes firms not profitable is the $$$ it takes to get projects - the marketing dept, and putting bids together.  

    The utilization rate is the % of hours that are billable.  Most folks aren't billable for 40 hrs per week, so their time doing training or general office work (time sheets, staff meetings, etc) is an indirect expense.  So you are correct, the hours that aren't not billable are an indirect expense and should be added in.  Hopefully the overhead isn't too high the and architecture firm can be profitable.

    Hope this helps!  

    Rebekka O'Melia, Registered Architect, NCARB, B. Arch, M. Ed, Step UP, Step UP ARE 5.0 Courses

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