Question

What's the overhead of a pharmacy in a year that it pays $474,900 in salaries, $24,000 in rental fees, $31,505 for utilities, $126,000 in inventory costs, $7,005 in computer system repairs, and has a depreciation rate of $12,110? a) $549,520 b) $675,520 c) $510,505 d) $644,015

Answer 1

Answer: $549,520 (choice A)

Explanation:

Overhead is the cost of everything that isn't directly tied to the sale of the product. We will sum the following:

• salaries
• rental fees
• utilities
• computer system repairs
• depreciation rate

In other words, it's the sum of everything listed except for the inventory costs. The inventory costs are operating costs and not overhead.

Adding the items mentioned gets us

$474,900+$24,000+$31,505+$7,005+$12,110 = $549,520