The overhead costs for a company are presently $Xper month. The management team of the company, in cooperation with the employees, is ready to implement a comprehensive improvement program to reduce these costs. If you (a) consider an observation of actual overhead costs for one month analogous to an output unit, (b) estimate the overhead costs for the first month of program implementation to be 1.15Xdue to extra front-end effort, and (c) consider a 90% improvement curve applicable to the situation, what is your estimate of the percentage reduction in present overhead costs per month after 30 months of program implementation?

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.