Calculations in German

Things You'll Need

List of Overhead Costs

Lost of Overhead Expenses

Number of Direct (salaried) and Indirect Staff

Step 1

Draw up a list of your business expenses. Your list should be comprehensive and include items like rent, utilities, taxes and building maintenance, which are examples of overhead costs. Other items are inventory, raw materials and production labor, which are not considered overhead.

Step 2

Categorize each item on your list of expenses according to whether it is the result of producing a good or service. For example, shop floor labor and the cost of raw materials are direct costs since they are incurred only when some item is being manufactured. All indirect costs are overhead. Keep in mind that some items won’t fall easily into one category or the other, so you must make some judgment calls. For example, most businesses classify legal expenses as overhead. However, for a law firm, a lawyer's salary is a direct cost, since her work is directly linked to producing the legal services which are the firm's product. Most business people find it helpful to follow the accepted conventions used in their particular industry for classifying expenses as direct or overhead costs.

Step 3 

Add all of the overhead costs for the month to calculate the aggregate (total) overhead cost. You can choose another time period, but most business people find one month to be the most useful.

Step 4

Calculate the proportion of overhead costs compared to sales. Knowing the percentage of each dollar that goes to overhead allows you to properly allocate costs when setting prices and drawing up budgets. Divide your monthly overhead cost by monthly sales and multiply by 100 to find the percentage of overhead cost. For example, a business with monthly sales of $900,000 and overhead costs totaling $225,000 has ($225,000/$900,000) * 100 = 25 percent overhead.