Overhead Recovery Rate Calculator

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

About Overhead Recovery Rate Calculator

The overhead absorption rate is budgeted overhead divided by the budgeted base — labour hours, machine hours or direct cost. Applying it to the actual base gives overhead absorbed; the difference from overhead actually incurred is the over- or under-absorption that must be written off or carried in the accounts.

Formulas

Absorption rate

Rate = budgeted overhead / budgeted base

Variance

Absorbed = rate x actual base; variance = absorbed - actual overhead

Worked example

With the default values below, Overhead Recovery Rate Calculator returns Overhead Absorption Rate of $80.000. Change any input above and every figure here is recalculated in your browser.

Inputs used

Total Overhead To Absorbminimum 0: 3,200,000
Absorption Base Quantityminimum 0.01 labour hours: 40,000 labour hours
Actual Base Achievedminimum 0 labour hours: 37,500 labour hours
Actual Overhead Incurredminimum 0: 3,150,000

Results

Overhead Absorption Rate: $80.000
Overhead Absorbed: $3,000,000.00
Over/Under Absorption: -$150,000.00
Absorption Status: Under-absorbed

Step by step

1Values used
2Absorption rate
3Variance
4Overhead Absorption Rate= 80.000
5Overhead Absorbed= 3,000,000.00
6Over/Under Absorption= -150,000.00
7Absorption Status= Under-absorbed

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 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

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 causes under-absorption?

Either overhead spending above budget or activity below budget. Splitting the variance into expenditure and volume components tells you which, and they have very different remedies.

Which absorption base is best?

Machine hours where processes are capital-intensive, labour hours where they are labour-intensive. Using an unrelated base such as material cost distorts product costs badly.