How overhead allocation works.

Direct costs are easy. The hard part of costing is deciding how rent, machine time, insurance and admin get split across the things you sell. Get that split wrong and every margin you report is wrong with it.

QuickCosting does not add a blanket percentage on top of your materials and call it overhead. It uses multi-pool absorption costing with usage drivers.

Costs live in pools, not in one blanket markup

Group your indirect costs into as many pools as your business actually has. Workshop rent and power in one, machine time in another, admin and software in a third. Each pool holds its own cost lines and is allocated on its own terms.

Each pool carries its own allocation units

A pool is divided by the sellable units it is meant to serve over the period, not by a percentage of your material cost. If a pool covers 980 units across four products, every unit absorbs the pool total divided by 980.

Every line has a rate basis: fixed, or per unit of usage

A fixed line is a flat total for the period, the way rent behaves. A per-unit line is multiplied by actual usage against a unit of measure you choose, such as a machine hour or a unit shipped.

Pools apply only to the products assigned to them

Assign a pool to the products that genuinely consume it. Unassigned products absorb nothing from it. This is the part a single blended overhead rate cannot express.

Over-absorption is caught, not left to be discovered

If the products assigned to a pool add up to more usable units than the pool was set up to cover, more cost gets absorbed than the pool actually contains. QuickCosting flags that mismatch and tells you which way to correct it.

A worked example

Say your workshop pool holds $4,900 for the month:

,200 power and $700 insurance. You expect to sell 980 units across the four products made in that workshop, so the pool's allocation units are 980. Each unit absorbs $4,900 divided by 980, or $5.00 of workshop overhead. A fifth product assembled off site and assigned to a different pool absorbs none of it.

Now add a machining pool with a per-unit line at $0.40 per machine hour. A product that takes 15 minutes on the machine absorbs $0.10. One that takes two hours absorbs $0.80. A flat percentage markup cannot produce either number.