how is overhead calculated 
since overhead is often considered a general expense it is accumulated as a lump sum this is then allocated to a specific product or service there are a number of different ways of calculating overhead however the general rule is the following overhead rate indirect costs allocation measure the indirect costs are the overhead costs while the allocation measure would include labor hours or direct machine costs which is how the company measures its production the bottom lineoverhead refers to the costs of running a business that are not directly related to producing a good or service these costs can be fixed such as rent or variable such as transport costs they can also be semi variable such as utilities effectively managing your overhead allows you to keep costs low set competitive prices and maximize the most of your revenues 