Contribution Margin per Unit and Total Calculator
Calculate unit contribution using the variable costs relevant to output.
Business
Manufacturing Overhead Allocation Calculator
Allocate manufacturing overhead using the budgeted base and the activity actually entered. Keep direct materials, direct labour and selling costs out of the indirect manufacturing pool.
Your numbers
How the calculation works
Allocate a manufacturing overhead pool using one chosen activity base. The tool totals indirect production costs, calculates a rate per base unit and applies that rate to the activity supplied.
Predetermined overhead rate = overhead pool / budgeted allocation base. Applied overhead = rate × actual base activity. Difference = entered overhead pool − applied overhead.
Define the overhead pool
Add the listed indirect production expenses. A meaningful allocation requires costs related to the activities or products being charged, rather than an arbitrary collection of business expenses.
Calculate the allocation rate
Divide the entered pool by positive budgeted base quantity. The result is an amount per hour, unit or other consistently chosen activity measure.
Apply and reconcile
Multiply the rate by actual activity. Subtract applied overhead from the entered pool to show an unapplied amount, or excess allocation if negative.
Worked example: Machine-hour allocation
Sample inputs demonstrate the method. They are not a forecast or product offer.
The costs total €6,000. Dividing by 2,000 budgeted machine hours gives €3 per hour. Applied to 1,800 actual hours, this allocates €5,400 and leaves €600 of the entered pool unapplied.
- Indirect manufacturing costs
- Factory rent,2000 Indirect labour,3000 Maintenance,1000
- Budgeted allocation-base quantity
- 2000
- Actual allocation-base quantity
- 1800
Expected result
- Total manufacturing overhead
- €6,000.00
- Overhead per allocation-base unit
- €3.00
- Overhead applied
- €5,400.00
Worked example: Above plan
Sample inputs demonstrate the method. They are not a forecast or product offer.
- Indirect manufacturing costs
- Factory pool,1000
- Budgeted allocation-base quantity
- 100
- Actual allocation-base quantity
- 120
Expected result
- Overhead per allocation-base unit
- €10.00
- Unapplied amount of entered pool
- -€200.00
Understanding your result
The final difference compares applied overhead with the pool supplied here. When that pool represents budgeted costs, the difference is a budget allocation comparison.
Do not automatically label it actual under- or over-applied overhead. That conclusion requires actual incurred cost and a consistent predetermined-rate basis, which this single-pool form does not collect separately.
Questions you might have
Can I mix machine hours with labour hours?
Not in one rate. Choose a consistent allocation base or run separate pools for the different production activities.
Choosing the right inputs
- Indirect manufacturing costs
- Enter indirect manufacturing costs as label,amount, without headings. Exclude direct materials, direct labour and non-production expenses from this pool.
- Budgeted allocation-base quantity
- Choose one budgeted base, such as machine hours, and enter its quantity for the same period as the overhead pool.
- Actual allocation-base quantity
- Use actual activity in that same base. Do not enter units produced if the rate was calculated per machine hour.
Common mistakes to avoid
- Avoid mixing machine hours and labour hours in one denominator; separate activities may require separate pools.
- Do not confuse allocated overhead per hour with direct wages or total production cost per hour.
Assumptions to check
- Use amounts in one currency and one reporting period. Results are labelled EUR; the arithmetic also works for another consistent currency.
- Direct materials and direct labour are not overhead. Selling and administration costs are excluded from manufacturing overhead.
Sources and method
Read our calculation and testing approach.