Overhead Allocation

Category: finance

The process of assigning indirect costs to products or services.

Overhead (rent, utilities, HR) doesn't belong to a single project. Allocation is the "fair share" math. You might allocate overhead based on square footage, headcount, or labor hours to ensure every project "carries its weight" in the firm’s total budget.

Common Examples

• The overhead allocation for our development team was adjusted to reflect their increased use of high-performance dedicated servers.
• Proper overhead allocation ensures that our low-margin services are not inadvertently stealing capital from our high-margin data products.