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SAP Overhead Rate and Absorption Calculator

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.

Your numbers

$

Planned costs of the overhead cost center or pool for the year.

$

Planned direct labor or material cost to which overhead is applied.

1,000,000 $

Actual direct labor or material cost in the period.

$

Actual costs posted to the overhead pool.

Your results

Over or under absorbed
-$15,000
Positive means over absorbed, negative means under absorbed.
Overhead surcharge rate
60%
Rate that would be stored in the costing sheet.
Overhead applied to products
$600,000
Actual base multiplied by the planned rate.
Absorption coverage
97.6%
Applied overhead as a share of actual overhead.
Base needed for full absorption
$1,025,000
Actual base at which applied overhead equals actual overhead.

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.

Save results:

Applied overhead and variance vs actual base

Sweeps Actual allocation base from 500000 to 1500000, holding your other inputs fixed.

Want overhead rates tested on real data?

We can discuss comparing planned overhead rates with actuals pulled from your ERP.

Optional. The tool and every export work without this. No spam.

How to use the calculator

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

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

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

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.

Frequently Asked Questions

Where is the overhead rate maintained in SAP?

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?

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?

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?

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.

If you want to test overhead rates against your actual ERP cost data before changing the costing sheet, we can help prepare the analysis.

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