Online Tool Store
Overhead Allocation Calculator
Allocate overhead across products, jobs, or departments using a chosen driver, and see how much the result depends on the driver you picked.
🔒 This tool runs entirely in your browser. Your files are never uploaded to a server.
Finance
Overhead Allocation Calculator
Frontend preview — no upload or external service.
Allocation result
120,000 over 8,000 labour hours gives a rate of 15.00 per hour: product A absorbs 60,000, B 22,500, C 37,500.
How the Overhead Allocation Calculator works
- Enter total overhead for the period and the driver you allocate on.
- Enter each product or job's share of that driver.
- Try a second driver before trusting the result — if the answer changes a lot, the driver choice is doing the work, not the costing.
The method
An absorption rate spreads a pool of overhead across output in proportion to a chosen driver, which is assumed to cause the cost.
rate = total overhead / total driver units; allocated = rate x product's driver units
120,000 over 8,000 hours is 15.00 an hour, so a product using 4,000 hours absorbs 60,000 — but on machine hours the same product might absorb half that.
FAQ
Which driver should I choose?
The one that actually causes the cost. Machine-heavy overhead follows machine hours; setup and handling costs follow batch counts, not volume, which is the argument for activity-based costing.
Why does my low-volume product look profitable?
Volume-based allocation under-charges small, complex batches because they consume setup and handling out of proportion to their unit count. It is the classic cross-subsidy in absorption costing.
Does allocation change total profit?
No. It only moves cost between products. It changes which products look profitable, which is precisely why the driver choice matters.
How we compare
| Feature | Online Tool Store | A spreadsheet | An advisor consultation |
|---|---|---|---|
| Compare multiple drivers | ✓ | Manual | Sometimes |
| Rate and allocation shown | ✓ | Formula needed | ✓ |
| No ERP access | ✓ | ✓ | ✗ |
| Nothing uploaded | ✓ | ✓ | ✗ |
Overhead Allocation Calculator encourages running two drivers, because the gap between them tells you how much of your product profitability is an accounting choice.