Overhead

Definition

Indirect costs that support the business as a whole and cannot be traced to a single product, project, or customer: executive salaries, office rent, accounting, legal, HR, general insurance.

Formula

Allocated overhead (product i) = Total overhead x allocation share(i)

Worked Example

$30,000/month of overhead, allocated by direct-cost proportion across 3 products:

             Direct Cost   Share   Allocated
Product A      $40,000      50%     $15,000
Product B      $24,000      30%      $9,000
Product C      $16,000      20%      $6,000
              --------     ----     -------
Total          $80,000     100%     $30,000

Product A fully loaded cost = $40,000 + $15,000 = $55,000

Interpretation & Pitfalls

Allocation is always somewhat arbitrary. Pick a driver (headcount, revenue, direct cost, usage) that genuinely correlates with consumption, document it, apply it consistently.

In TupicFinance

Overhead is a dedicated cost category; allocation rules distribute it across projects for fully-loaded cost reporting.