Overheads are the indirect expenses of a business that are not directly related to the production of goods or services but are necessary for the smooth running of the business. These expenses are divided into four broad classifications: production, selling, distribution, and administration.
1. Production overheads: These are the indirect costs associated with the production process, such as rent, utilities, and maintenance of plant and equipment. These costs are necessary for the production of goods or services and are allocated to the cost of production.
2. Selling overheads: These are the indirect costs associated with the sales department of a business, such as advertising, marketing, and sales commissions. These costs are necessary for the promotion and sale of goods or services and are allocated to the cost of sales.
3. Distribution overheads: These are the indirect costs associated with the distribution of goods or services, such as transportation, warehousing, and packing materials. These costs are necessary for the delivery of goods or services and are allocated to the cost of distribution.
4. Administration overheads: These are the indirect costs associated with the general administration of the business, such as salaries of office staff, office rent, and office supplies. These costs are necessary for the smooth running of the business and are allocated to the cost of administration.
Therefore, the correct answer to the question is option B: production, selling, distribution, and administration.