Applied Manufacturing Overhead Calculator
Three modes in one tool — calculate your predetermined overhead rate (POHR), apply overhead to a specific job to build a full job cost card, or find your over- or underapplied overhead variance at year-end. Every result shown with the full calculation and plain-English interpretation.
Choose a calculation mode
Start with Mode 1 to get your POHR, then use Mode 2 to apply it to individual jobs. Use Mode 3 at year-end to check your variance.
Calculate your predetermined overhead rate from budgeted figures at the start of the year.
Apply overhead to a specific job and build a complete job cost card.
Compare total applied overhead to actual overhead at year-end to find your over- or underapplied variance.
Three-step workflow
Step 1 (POHR): divide estimated overhead by estimated base activity — once at year start.
Step 2 (Apply): multiply POHR × actual job activity for each job.
Step 3 (Variance): compare applied vs actual at year-end.
Why predetermined rates?
Actual overhead is only known at year-end. Using a POHR lets you cost jobs in real time throughout the year — then correct the small variance once annually rather than delaying all product costing.
Applied overhead formulas
Frequently asked questions
What is the predetermined overhead rate (POHR)?
POHR = Estimated total manufacturing overhead ÷ Estimated total allocation base activity. Calculated once at the start of the year from budgeted figures. Used throughout the year to apply overhead to jobs without waiting for actual costs to be finalised.
What is overapplied vs underapplied overhead?
Overapplied: total applied overhead exceeds actual overhead — COGS was overstated, requires a year-end reduction. Underapplied: applied overhead falls short of actual — COGS was understated, requires a year-end increase. Formula: Applied − Actual. Positive = overapplied; negative = underapplied.
Which allocation base should I use?
Choose the base with the strongest causal link to overhead consumption. Direct labour hours works for labour-intensive plants. Machine hours is better for automated facilities. Direct labour cost is useful when wage rates vary significantly by skill level.
How do I dispose of over/underapplied overhead at year-end?
The simple method: close the entire balance to COGS — add underapplied overhead to COGS, subtract overapplied from COGS. The accurate method: prorate the variance across ending WIP, Finished Goods, and COGS based on their relative balances. Use proration when the variance is material.
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These tools work alongside applied overhead in cost accounting.
Disclaimer
This calculator provides estimates based on standard normal costing methodology. Actual overhead application rules depend on your cost accounting system, capacity basis (normal, practical, theoretical), and applicable accounting standards. Consult a qualified cost accountant for formal product costing and financial reporting purposes.