PLEASE REPLY TO EACH CLASSMATE. New Post by Jeremiah Gadson Overhead costs are costs produced from indirect costs, materials, labor, that do not go into the finished product. This can influence management decisions in the sense that management would want to control overhead costs since they do not directly influence the finished product. To associate to a normal household, most people have a set temperature on the thermostat during both the summer and winter. The main reason household do this is to reduce the cost of the electricity bill. The same is true for companies, they want to ensure overhead costs are within control. If adding a new product to the factories production process added a severe amount of overhead, it would make managers hesitant to finalize the decision. Managers have to consistently keep costs such as overhead costs in mind even when it seems the decision may not affect the overhead. Due to the nature of overhead, it is impossible for a decision to not have an impact on it (Warren, Reeve, & Duchac, 2017). References Warren, C. S., Reeve, J. M., & Duchac, J. (2017). Managerial Accounting. [VitalSource Bookshelf]. https://bookshelf.vitalsource.com/#/books/9781337516143/ New Post by Bryanna Young 5 days ago Re: ***REPLY HERE*** When it comes to making management decisions there are many different factors that play a role, one being overhead costs. Overhead costs help companies set prices because the overhead costs do not depend on just the direct costs, the overhead costs play a major role as well. Overhead costs also play a special role in meeting regulatory requirements. US GAAP wants all manufacturing costs to comply, those costs include direct material, direct labor, and overhead costs. It is very important to monitor the overhead costs because even though they are not directly related to pricing, if the cost increases you are losing profit. Lastly, the overhead costs play a role in preparing the holistic budget. While estimating the overhead costs is difficult, this means the overhead costs cannot be attributable to a product directly. Therefore, the overhead costs are allocated to the products later on. If the overhead costs can be estimated correctly, then the budget can be prepared in an efficient and reliable way.