We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Accounting

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Burden Cost?

Malcolm Tatum
By
Updated: May 16, 2024
Views: 17,743
Share

Also known as overhead, a burden cost is an expense that is considered important to a business operation but does not directly contribute to the actual creation of a good or service. Instead, expenses of this type often provide the framework for the operation of the company, essentially helping to maintain an environment in which that production may take place. As with all types of business expenses, a company will track each burden cost and attempt to manage it in a manner that is in the best interests of the operation.

One of the easiest ways to understand what constitutes a burden cost is to identify expenses that are necessary within the operation, but don’t really add directly to the goods or services produced. Some expenses obviously do contribute directly to the end products, including the direct labor of those who work on the production line or the cost of the raw materials used to create those products. Other essentials such as the administrative and clerical functions that keep the business going, or even expenses like the rent or lease payments made on the building in which the operation is housed are indirect expenses and classed as burden costs.

A burden cost can take on many forms in a business operation. The expense associated with maintaining and repairing machinery used in the production process falls into this category. In like manner, the benefits offered to workers such as health insurance, vacation and sick days, and other extras are also considered to be burden costs. The cost of the natural gas, water, and electricity used to operate the facility in general, including the administrative offices, is another type of burden cost. Essentially any legitimate business expense that is related to the upkeep and maintenance of the facility but is not directly connected with the final goods produced can be considered a burden cost.

In many companies, the overall burden cost constitutes a major portion of the expense. To this end, review of each cost periodically can help to identify when and how reductions can be made, either by eliminating administrative, managerial or clerical positions that are not needed, or finding ways to trim consumption of certain goods and services without negatively impacting the production process. When burden cost can be kept to a minimum, the company can operate with a smaller budget, and increase the amount of return generated by the sale of each unit of the finished product.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.smartcapitalmind.com/what-is-a-burden-cost.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.