Allocating overhead
Overhead is a cost that serves the whole business rather than one product or service. Allocating it means sharing it across products by a chosen base. The total is a fact; each share is a choice.
Allocation rate = Total overhead ÷ Allocation base | Share of a product = Rate × Base the product used
Why it matters
Rent, electricity and security cannot be traced to a single product, yet the price of each product should carry a fair part of them. The base you choose changes each product's apparent cost, though not the total.
Where it appears in a CFO+ model
- In the monthly fixed-cost lines, which carry costs shared by the whole activity.
- In the unit cost and margin views that spread those costs over what the activity sells.
- The total stays the same whichever base is used; only the split moves.
Learn the concept in the Academy
Activities where it shows up
- Agriculture & Production
- Café & Coffee Shop
- Fintech
- Fuel Station
- Gym & Fitness Club
- Hospital
- International Freight & Clearance
- Jewelry & Gold
- Maintenance & Technical Services
- Marketplace Platform
- Medical Laboratory
- Metal Machining & Fabrication
- Printing & Packaging
- Real Estate Brokerage
- Real Estate Development
- Tourist Resort
- Training & Development
- Warehousing & Storage
No figures are published: a definition and a formula only.