Indirect costs — also called overhead — are expenses that support overall business operations but cannot be directly linked to a specific product or service. They benefit the entire organization, not just one item.
Examples include rent, utilities, administrative salaries, insurance, and IT infrastructure. A factory's electricity bill powers the entire facility, not just one product line — making it an indirect cost.
Indirect costs are allocated across products or departments using methods like activity-based costing. Understanding them is essential for accurate product pricing and profitability analysis.