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Calculator · Pricing & Margin

Overhead Allocation Calculator

Allocate a defined overhead pool using one activity driver, then convert the assigned job cost into overhead per unit for a consistent budget.

By PriceAndProfit Editorial Updated

$
driver units
driver units
units

Fill in the fields: the result appears under the form, with the formula below it.

Clear

Formula and cost boundary

Activity rate = overhead pool ÷ total activity; job overhead = activity rate × job activity

Choose a driver tied to the costs: machine hours, labor hours or batches, and use that same unit in both activity fields. The job activity cannot exceed the total activity of the pool. A budget rate does not prove that all overhead is avoidable. Do not also subtract the same fixed pool after treating this allocation as variable cost in a break-even model.

Worked example: Machine hours

The following inputs are hypothetical values for checking the calculation. They are not recommended prices, wages, margins or platform charges. Keep the units and period shown in each label when replacing them with your own records.

Inputs for this worked example
InputExample value
Overhead pool for the period $12,000
Total activity for the period 600 driver units
Activity consumed by this job 90 driver units
Units produced by this job 300 units
Outputs from the displayed inputs
ResultCalculated value
Overhead assigned to job $1,800
Overhead per job unit $6
Cost per activity unit $20/driver unit

Using the result

Save the input set alongside the source date of each quote or cost record. Review the cost boundary before comparing this result with another report: a contribution measure may exclude overhead, and a cash measure follows payment dates. Display rounding does not change the underlying assumptions. Recalculate when an input changes; the tool does not predict future sales or collections.

Are any rates supplied automatically?

No. Numeric fields are your inputs. Example values demonstrate arithmetic only. Check your contracts and records for the amounts that apply to your business.

Why might a result be unavailable or negative?

A missing denominator or inconsistent inputs can make the calculation undefined. Those combinations are rejected or labeled explicitly. A valid negative result remains visible because it may identify a loss or cash shortfall.

Method reference: OpenStax: Basic Cost Behavior Patterns. Checked October 22, 2026. Cost classifications and activity assumptions; allocations do not establish avoidable costs.

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