What is the correct budget category for labor forecast?

Labor forecasts typically fall under operational expenses because they represent the ongoing costs directly associated with the day-to-day functioning of a business. These expenses include wages, salaries, and benefits for employees who are essential for operations. Operational expenses are key to predicting how much labor will cost as part of running the business efficiently and effectively.

While variable costs also relate to labor, as they can fluctuate depending on hours worked or the amount of labor inversely related to production, not all labor costs fit this description. Fixed costs pertain to expenses that do not change regardless of business activity levels, which does not accurately encompass labor that can be adjusted based on demand. Overhead costs are more general and include indirect labor costs and other expenses not directly tied to production, making operational expenses the most accurate classification for labor forecasts in relation to this question.