Overhead definition. Analyzing the definition of key terms often provides more insight about concepts. Overhead can be defined as – Factory activities supporting the production process that are not direct material or direct labor; also called factory overhead and manufacturing overhead. Manufacturing companies can break out inventory costs into three components of direct material, direct labor and overhead. Direct material and direct labor can be tracked to a specific job or process while overhead cannot. A company needs to include overhead into the cost of inventory and into a job or process overead cannot be allocated directly to a cost or process and is therefor grouped together into an account called overhead to be allocated to jobs or process using an estimate.
