Novak Kars provides shuttle service between four hotels near a medical center and an international airport. Novak Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below. Fare revenues (1,400 fares)       $28,000 Variable costs             Fuel   $5,040         Tolls and parking   2,520         Maintenance   840   8,400 Contribution margin       19,600 Fixed costs             Salaries   15,200         Depreciation   1,260         Insurance   970   17,430 Net income       $2,170

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.