How to Calculate the Predetermined Monthly Overhead Rate
Overhead is the amount that you need to pay each month to keep your business in constant operation. If you're confused as to the items that make up overhead, ask yourself, "if we didn't pay for it, would we be able to stay open?" You can calculate your predetermined monthly overhead rate using a simple formula.
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Instructions
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Tally up your total overhead costs. That includes the money you pay employees or contractors each month, equipment maintenance fees, utilities, computer systems and other required service fees. Assume, for example, the total overhead is $4,250 per month.
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Determine the total number of hours that your company stays in operation during a month. So for instance, if you operate 10 hours per day, five days a week, the total figure for a standard four-week month is 200 hours.
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Divide the total overhead by the operational hours you estimated for the monthly period to calucate the predetermined overhead rate. In this example the rate is $21.25 per hour.
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