Business Overhead Calculator
Reduce overhead costs and improve profitability. Identify every indirect expense, calculate your overhead rate, and find ways to cut waste.
How the Business Overhead Calculator works
List all indirect costs (rent, admin, insurance, etc.), calculate what percentage they are of your sales, and allocate them to each product to see true costs.
Overhead expenses creep up quietly and kill profits. Most businesses don’t realize how much they’re spending on indirect costs until they calculate it and find 20-30% waste.
How it works
Tutorial
Overhead costs are the silent profit killer. These indirect expenses – rent, administration, insurance – don’t directly produce products but eat into your margins. Calculating your overhead rate shows you exactly how much these costs add to each product.
You have two options: use the calculator above for instant overhead analysis, or follow this guide to calculate overhead manually.
The Formula
| What to Calculate | How to Calculate It |
|---|---|
| Total Overhead | Add all indirect costs |
| Overhead Rate | (Total Overhead ÷ Direct Labor Cost) × 100 |
| Product Overhead | Direct Labor × Overhead Rate |
Step-by-Step Example
Let’s calculate overhead for a manufacturing business.
Step 1: List All Overhead Costs
Write down every indirect expense:
| Overhead Category | Monthly Cost |
|---|---|
| Rent and Utilities | $12,000 |
| Admin Staff Salaries | $18,000 |
| Insurance | $2,500 |
| Depreciation on Equipment | $4,000 |
| Office Supplies | $1,500 |
| Accounting and Legal | $3,000 |
| Total Monthly Overhead | $41,000 |
Calculation:$12,000 + $18,000 + $2,500 + $4,000 + $1,500 + $3,000 =$41,000
Step 2: Calculate Overhead Rate
Find overhead as a percentage of direct labor:
| What to Calculate | Amount |
|---|---|
| Total Monthly Overhead | $41,000 |
| Direct Labor Cost (production workers) | $50,000 |
| Overhead Rate | 82% |
Calculation:($41,000 ÷ $50,000) × 100 =82%
Step 3: Apply Overhead to Products
Add overhead to each product’s cost:
| Product | Materials | Direct Labor | Overhead (82% of labor) | Total Cost |
|---|---|---|---|---|
| Product A | $50 | $100 | $82 | $232 |
| Product B | $30 | $60 | $49 | $139 |
Calculation example:Product A overhead: $100 × 0.82 =$82
Final Answer:For every $1 in labor, add$0.82for overhead
What This Means
An 82% overhead rate means indirect costs nearly equal your direct labor. If overhead exceeds 100% of labor, you’re spending more on administration than production – a clear sign to cut indirect costs.
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