Overhead Allocation for Custom Millwork Jobs

Overhead allocation distributes shared operating costs across jobs using a defined basis.

Written by Coby BirenbaumPublished Oct 19, 20262 min read

Illustrative photograph of a production manager reviewing job drawings at a workbench

Overhead Allocation for Custom Millwork Jobs

Overhead allocation distributes shared operating costs across jobs using a defined basis. The method should be understandable and consistent enough to support decisions. It is a model of cost recovery, not a direct measurement of every resource each job consumed.

Choose a basis deliberately

Identify the cost pool and exclude costs already charged directly.
Compare labor hours, machine hours, or another relevant driver.
Use a realistic activity base and review seasonal or capacity changes.
Document which reports use the allocated amount.

Worked example

An illustrative overhead pool of $120,000 divided by 6,000 planned labor hours produces a $20-per-hour allocation rate. A job using 50 hours receives $1,000 under that model. The arithmetic is simple; the suitability of the cost pool and activity base needs business review.

Review the result

Compare allocated overhead with actual shared costs over the review period. Large differences may indicate changed activity, an incomplete pool, or a basis that no longer fits the work.

Definitions and further reference

Intuit: job costing and cost records

How Millbase can help your shop

Bring job-cost reviews back to the recorded work

Use Millbase project tracking to keep a cabinet job and its sub-projects together, then compare estimates with recorded labour and material costs. Insights and reports help the team inspect the people and workstations behind a total and export supported results for the next review.

Ask the Millbase AI agent a question grounded in your workspace records. For example: “Compare this project’s estimated and actual labour, then break the logged hours down by workstation.” You can select a project or worker, ask follow-up questions, and request supported reports and CSV exports.

Check the date range, job scope, and recorded inputs before changing a quote. Keep the accounting treatment of overhead, tax, and revenue in the appropriate financial process; a shop-floor cost breakdown is only as complete as the inputs recorded.