Business Overhead Calculator
Overhead costs kill profitability. Calculate and optimize indirect costs with detailed allocation and benchmarking analysis.
How the Business Overhead Calculator works
Identify all overhead costs, calculate rates, allocate to products/departments, and benchmark against industry standards. Find reduction opportunities without compromising quality.
Overhead creeps up unnoticed. This calculator exposes hidden costs, helping you maintain lean operations while supporting necessary functions.
How it works
Tutorial
Overhead costs creep up unnoticed, eroding profitability while providing no direct customer value. Calculating overhead rates and allocating to products reveals true costs, informing pricing decisions and identifying reduction opportunities without compromising operations.
You have two options: use the calculator above for automated overhead analysis, or follow this guide to manually calculate business overhead.
The Formula
| Metric | Formula |
|---|---|
| Total Overhead | Sum of All Indirect Costs |
| Overhead Rate | (Total Overhead ÷ Direct Labor Cost) × 100 |
| Product Overhead | Direct Labor × Overhead Rate |
Step-by-Step Calculation
Here’s a complete overhead calculation and allocation.
Step 1: Identify All Overhead Costs
List every indirect expense:
| Overhead Category | Monthly Amount |
|---|---|
| Rent & Utilities | $12,000 |
| Administrative Salaries | $18,000 |
| Insurance | $2,500 |
| Depreciation | $4,000 |
| Office Supplies | $1,500 |
| Professional Services | $3,000 |
| Total Monthly Overhead | $41,000 |
Calculation: Sum all indirect costs = $41,000
Step 2: Calculate Overhead Rate
Determine overhead as percentage of direct labor:
| Component | Amount |
|---|---|
| Total Monthly Overhead | $41,000 |
| Direct Labor Cost | $50,000 |
| Overhead Rate | 82% |
Calculation: ($41,000 ÷ $50,000) × 100 = 82%
Step 3: Allocate Overhead to Products
Apply overhead rate to determine true product cost:
| Product | Direct Materials | Direct Labor | Overhead (82%) | Total Cost |
|---|---|---|---|---|
| Product A | $50 | $100 | $82 | $232 |
| Product B | $30 | $60 | $49 | $139 |
Final Answer: Every $1 of labor carries $0.82 in overhead
What This Means
An 82% overhead rate means indirect costs nearly match direct labor. If your overhead exceeds 100%, you’re spending more on administration than production—a clear signal to cut indirect costs or increase production efficiency.
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