How do you allocate overhead to a job?

Multiply the overhead burden rate by the job's overhead-bearing hours, then apply the overhead scope and recovery factor. With $42/hr over 310 hours, 100% scope and 92% recovery, gross overhead is $13,020 and allocated overhead is $11,978.40.

What is an overhead burden rate?

It's indirect cost expressed per hour, found by dividing your total overhead pool by the hours you spread it across. Here it's $42 for every overhead-bearing hour a job consumes.

What does the overhead recovery factor do?

It scales gross overhead down to what you realistically recover. At 92% you only capture 92% of full overhead, so $1,041.60 of overhead on this job is at risk of not being recovered.

What is overhead scope charged to the quote?

It's the share of full overhead this particular quote should carry, useful when a job uses fewer shared resources than average. At 100% the job carries its full standard overhead and nothing is left off.

Why is allocated overhead less than gross overhead?

Gross overhead ($13,020) is the full burden before adjustments. Allocated overhead ($11,978.40) reflects the recovery factor, here the 92% you actually expect to recover, with the $1,041.60 difference flagged as recovery at risk.

What happens if my recovery factor is too low?

A recovery factor below 100% means part of your overhead isn't being recouped through quotes. Across a full year of jobs an 8% shortfall, like the $1,041.60 here, compounds into real money the shop absorbs out of profit.

Contract Manufacturing, Job Shop Quoting & Make-to-Order calculator

Overhead Allocation Calculator

Overhead allocation is how a job shop loads its indirect costs (facilities, indirect labor, utilities, insurance, depreciation on shared assets) onto a specific job so the quote actually covers them. It works by applying a per-hour burden rate to the job's overhead-bearing hours, then adjusting for how much of full overhead this quote should carry and how much you realistically recover. Estimators and controllers use it to make sure indirect costs aren't quietly absorbed by the shop instead of the customer, which is exactly how a busy plant can run flat-out and still miss its numbers. Done well, it turns a fuzzy pool of indirect spend into a defensible dollar figure on the quote.

What this calculator does

Estimate overhead dollars allocated to a quoted job or routing.
checking whether a quote includes enough burden to recover indirect shop cost
It computes the overhead dollars to absorb into a quote by applying a burden rate to the job's overhead-bearing hours, then adjusting for overhead scope and the recovery factor.

Formula used

gross overhead before recovery adjustments = overhead burden rate × quoted hours receiving overhead
allocated overhead dollars = gross overhead before recovery adjustments × overhead scope charged to the quote × overhead recovery factor

Inputs explained

Overhead burden rate:
Quoted hours receiving overhead:
Overhead scope charged to the quote:
Overhead recovery factor:

How to use the result

Use it when burdening a quote with indirect costs, testing whether a job carries its fair share of overhead, or modeling how an under-recovery factor erodes margin across a year of work.
It applies a single blended burden rate to hours, so a shop whose overhead is driven by something other than hours, or that has very different overhead intensity by workcenter, may need activity-based allocation instead of one rate.

Current U.S. benchmarks

The U.S. prime lending rate is 6.75% (Federal Reserve via FRED, 2026-07-02). Payback and financing math should start from today's rate, not a remembered one.

Common questions

How do you allocate overhead to a job? Multiply the overhead burden rate by the job's overhead-bearing hours, then apply the overhead scope and recovery factor. With $42/hr over 310 hours, 100% scope and 92% recovery, gross overhead is $13,020 and allocated overhead is $11,978.40.
What is an overhead burden rate? It's indirect cost expressed per hour, found by dividing your total overhead pool by the hours you spread it across. Here it's $42 for every overhead-bearing hour a job consumes.
What does the overhead recovery factor do? It scales gross overhead down to what you realistically recover. At 92% you only capture 92% of full overhead, so $1,041.60 of overhead on this job is at risk of not being recovered.
What is overhead scope charged to the quote? It's the share of full overhead this particular quote should carry, useful when a job uses fewer shared resources than average. At 100% the job carries its full standard overhead and nothing is left off.
Why is allocated overhead less than gross overhead? Gross overhead ($13,020) is the full burden before adjustments. Allocated overhead ($11,978.40) reflects the recovery factor, here the 92% you actually expect to recover, with the $1,041.60 difference flagged as recovery at risk.

Last reviewed 2026-05-12.