Which are overhead expenses in a design business?

Overhead expenses, also known as indirect expenses, are costs required to run a business that are not directly attributable to a specific project or service. The items listed in option A—rent, taxes and licenses, insurance, advertising, and salaries for non-billable support staff—all fit this definition. These are ongoing operational costs that the firm incurs regardless of its project workload. Properly tracking these expenses is crucial for determining the firm's billing rates and overall profitability.

B. This option incorrectly includes "accounts payable," which is a liability (money owed by the business) on the balance sheet, not an expense on the income statement.

C. This option incorrectly includes "accounts receivable," which is an asset (money owed to the business) on the balance sheet, not an expense.

D. This option incorrectly includes "billable support staff." The cost of staff whose time is billed directly to projects is a direct expense, not an overhead expense.

1. Piotrowski

C. M. (2017). Professional Practice for Interior Designers (6th ed.). Wiley. In Chapter 11

"Financial Management

" the section on "Indirect Expenses" lists examples of overhead

including rent

utilities

insurance

marketing

and salaries for administrative (non-billable) staff (pp. 298-299).

2. Weygandt

J. J.

Kimmel

P. D.

& Kieso

D. E. (2019). Financial Accounting (11th ed.). Wiley. This standard university accounting textbook distinguishes between balance sheet and income statement accounts. It defines assets like Accounts Receivable and liabilities like Accounts Payable (Chapter 2

"The Recording Process")

which are distinct from expenses. It also differentiates direct costs from operating (overhead) expenses (Chapter 5

"Accounting for Merchandising Operations").