# SAP Overhead Rate and Absorption Calculator > Source: https://netray.co/tools/sap-overhead-rate-absorption-calculator > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer Compute an overhead surcharge rate from planned overhead and base, then see over or under absorption when the actual base moves. ## Category sap ## Erp SAP ECC / S/4HANA ## Audience - Cost accountant - SAP CO consultant - Plant controller ## Tool **Kind:** calculator **Currency:** $ **Inputs:** #### Planned overhead cost pool **Key:** plan_oh **Type:** number **Default:** 600000 **Min:** 0 **Step:** 10000 **Unit:** $ **Help:** Planned costs of the overhead cost center or pool for the year. #### Planned allocation base **Key:** plan_base **Type:** number **Default:** 1000000 **Min:** 0 **Step:** 10000 **Unit:** $ **Help:** Planned direct labor or material cost to which overhead is applied. #### Actual allocation base **Key:** actual_base **Type:** slider **Default:** 1000000 **Min:** 500000 **Max:** 1500000 **Step:** 25000 **Unit:** $ **Help:** Actual direct labor or material cost in the period. #### Actual overhead incurred **Key:** actual_oh **Type:** number **Default:** 615000 **Min:** 0 **Step:** 5000 **Unit:** $ **Help:** Actual costs posted to the overhead pool. **Outputs:** #### Overhead surcharge rate **Key:** rate **Expr:** plan_oh / plan_base * 100 **Format:** percent **Description:** Rate that would be stored in the costing sheet. #### Overhead applied to products **Key:** applied **Expr:** actual_base * rate / 100 **Format:** currency **Description:** Actual base multiplied by the planned rate. #### Over or under absorbed **Key:** variance **Expr:** applied - actual_oh **Format:** currency **Primary:** true **Description:** Positive means over absorbed, negative means under absorbed. #### Absorption coverage **Key:** absorb **Expr:** applied / actual_oh * 100 **Format:** percent **Description:** Applied overhead as a share of actual overhead. #### Base needed for full absorption **Key:** breakeven **Expr:** actual_oh / rate * 100 **Format:** currency **Description:** Actual base at which applied overhead equals actual overhead. **Chart:** #### Applied overhead and variance vs actual base **Type:** line **X:** actual_base **From:** 500000 **To:** 1500000 **Steps:** 21 **Series:** - applied - variance **Disclaimer:** Single rate, single base, one period. Real costing sheets in SAP may use several overhead rows with fixed and variable portions, different bases and credits from cost center splitting. Use this for orientation and for checking a rate before it is configured. ## Content **Intro:** A predetermined overhead rate is planned overhead divided by a planned base, and at the end of the period actual activity makes the books over or under absorbed. This calculator shows both the rate and the variance, and how sensitive the variance is to the base. **Sections:** #### How to use the calculator **Body:** Enter the planned overhead pool and planned base to get the rate. Then enter the actual base and actual overhead to see how much overhead was applied to production and how far it is from the actual cost. Move the base slider to test a volume drop or surge. The chart plots applied overhead and the variance as the actual base moves, so you can see where the variance crosses zero. #### The formulas **Body:** The rate is planned overhead divided by planned base, times one hundred for percent. Applied overhead equals actual base times the rate. The difference between applied and actual overhead is the absorption variance: positive means over absorbed, negative means under absorbed. The breakeven base is actual overhead divided by the rate. In SAP the rate lives in a costing sheet row, with the base being a set of cost elements, and the credit being posted from an overhead cost center. #### Reading the result **Body:** With the defaults the rate is 60 percent. At the planned base of one million, applied overhead is 600,000, but actual overhead was 615,000, so overhead is under absorbed by 15,000. If the base drops to eight hundred thousand, applied overhead falls to 480,000 and under absorption grows quickly. This shows why a mostly fixed overhead pool makes the variance volume sensitive. Variances may be written off to the P&L or allocated, depending on policy. #### Common mistakes **Body:** Frequent mistakes are applying a single rate to a pool that is mostly fixed and then being surprised by volume swings, using a base that production does not drive, changing the rate mid year without a clear policy, and ignoring that an overhead cost center must be credited, or the overhead is counted twice. Review the rate when plan volume moves materially, and keep fixed and variable overhead in separate rows where the system allows it. **Cta:** If you want to test overhead rates against your actual ERP cost data before changing the costing sheet, we can help prepare the analysis. **Faq:** #### Where is the overhead rate maintained in SAP? **Answer:** In the costing sheet definition in Controlling configuration, with overhead rows defining base, percentage and credit. It is used in product costing and, through overhead keys, in orders. Check your system configuration for the exact path. #### What is under absorbed overhead? **Answer:** It means the overhead applied to production was less than the actual overhead incurred. The difference is a cost that was not charged to products and typically goes to cost of sales or is allocated, depending on policy. #### Which base should I choose? **Answer:** Choose the base that best drives the overhead: direct labor for labor intensive plants, machine hours for automated cells, or material cost for purchasing overhead. Test which base correlates with overhead historically. #### Does this cover fixed and variable overhead separately? **Answer:** No. This is a single pool. If you split fixed and variable, run the calculator twice with separate pools and bases, and compare the variance of each. ## Search terms sap overhead rate calculator, costing sheet overhead percentage, under over absorbed overhead calculator, overhead absorption rate formula, sap co costing sheet surcharge, overhead rate on direct labor, manufacturing overhead variance calculator, predetermined overhead rate calculator --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json