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Overhead Absorption Calculator

Work out overhead absorption instantly with clear inputs, formula shown and shareable results.

About Overhead Absorption Calculator

An absorption rate is set before the period from budgeted overhead and budgeted activity. At the end of the period, absorbed overhead rarely equals actual overhead: the difference splits into an expenditure element (actual spend versus budget) and a volume element (actual activity versus budget).

Formulas

Absorption rate

Rate = Budgeted overhead / Budgeted activity

Absorbed overhead

Absorbed = Rate x Actual activity

Over/under absorption

Difference = Absorbed - Actual overhead

Worked example

With the default values below, Overhead Absorption Calculator returns Overhead absorption rate of $20.0000. Change any input above and every figure here is recalculated in your browser.

Inputs used

Budgeted overhead
480,000
Budgeted activity (hours or units)
24,000
Actual activity
22,600
Actual overhead incurred
495,000

Results

Overhead absorption rate
$20.0000
Overhead absorbed into production
$452,000.00
Over (+) or under (-) absorbed
-$43,000.00
Volume element of the difference
-$28,000.00

Step by step

  1. 1Values used
  2. 2Absorption rate
  3. 3Absorbed overhead
  4. 4Over/under absorption
  5. 5Overhead absorption rate= 20.0000
  6. 6Overhead absorbed into production= 452,000.00
  7. 7Over (+) or under (-) absorbed= -43,000.00
  8. 8Volume element of the difference= -28,000.00

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

What happens to under-absorbed overhead?

It is written off to the income statement in the period, so a volume shortfall hits profit twice — once through lost contribution and once through under-absorption.

Which activity base should I use?

Whichever drives the overhead: machine hours for capital-intensive work, labour hours for assembly, and units only where products are near-identical.

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Overhead Absorption Calculator | Calcrivo