The indirect costs of operating a  business that fluctuate somewhat with the level of business activity. While most overhead costs such as rent, salaries and insurance are typically fixed, overhead costs that increase with higher business activity and decrease with lower business activity are termed as variable overhead.

For the building & remodeling contractor Variable Overhead should represent all operating expense generated by the field personnel. These are costs that would not occur if no field personnel were employed. Variable cost will fluctuate directly with the amount of people a company employees as part of it production labor force

For the building & remodeling contractor Variable Overhead cost typically consist of:

  • FICA & Medicare
  • State Unemployment Tax
  • Federal Unemployment Tax
  • Worker’s Compensation
  • Paid Holidays
  • Paid Vacation Days
  • Medical Benefits & Insurance
  • Education & Training Costs
  • Vehicle Payments & Depreciation
  • Gas & Oil
  • Cell Phone
  • Vehicle Maintenance

(important see also Fixed Overhead)

Other Definitions

Variable Overhead– Variable Overhead should represent all operating expense generated by the field personnel. These are costs that would not occur if no field personnel were employed. Variable cost will fluctuate directly with the amount of people a company employees as part of it production labor force (important see also Fixed Overhead)

Variable Overhead– Overhead costs that change as a result of changes in production volume, but can not be directly traced to a given product or line. Ex.- utility costs that increase for a given facility in proportion to increased overall levels of production.  (Bridgefield Group ERP-Supply Chain Glossary)

J. Jerrald Hayes
I am ex-architectural woodworker and general contractor turned IT, Business and Project Management consultant, software developer wannabe senior division triathlete and ski racer, Yankee fan and founder of Paradigm-360.com, 360 Difference Mac4Construction.com,iOS4Construction.com and now TheBuildingAndRemodelingWiki.com too.
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