# Overhead Allocation for Custom Millwork Jobs

Canonical: https://millbase.ca/blog/overhead-allocation-for-custom-millwork-jobs
Author: [Coby Birenbaum](https://www.linkedin.com/in/cobybirenbaum/)
Published: 2026-10-19
Updated: 2026-10-19
Archive edition: 2026-06-12

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

[Overhead](https://quickbooks.intuit.com/learn-support/en-us/help-article/job-costing/track-job-costs-quickbooks-desktop/L2X01vi47_US_en_US) 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.

## Related reading

- [Labor Tracking by Cabinet Job and Workstation](https://millbase.ca/blog/labor-tracking-by-cabinet-job-and-workstation)
- [Rework Tracking That Improves Cabinet Estimates](https://millbase.ca/blog/rework-tracking-that-improves-cabinet-estimates)

## Definitions and further reference

- [Intuit: job costing and cost records](https://quickbooks.intuit.com/learn-support/en-us/help-article/job-costing/track-job-costs-quickbooks-desktop/L2X01vi47_US_en_US)

## How Millbase can help your shop

### Bring job-cost reviews back to the recorded work

Use [Millbase project tracking](https://millbase.ca/#projects) to keep a cabinet job and its sub-projects together, then compare estimates with recorded labour and material costs. [Insights and reports](https://millbase.ca/#insights) help the team inspect the people and workstations behind a total and export supported results for the next review.

Ask the [Millbase AI agent](https://millbase.ca/#how-it-works) 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](https://millbase.ca/#insights).

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.

## Explore the wider topic

For the broader workflow and decisions behind this guide, read [Cabinet Shop Job Costing: Separate Margin From Markup](https://millbase.ca/blog/cabinet-shop-job-costing-separate-margin-from-markup).

## Frequently asked questions

### Does allocation prove a job caused that expense?

Not necessarily. Shared costs are distributed through a chosen model. Keep that distinction clear in decisions about pricing or capacity.

### Should every shop use labor hours?

No. A machine-heavy operation may need another basis or multiple pools. Choose a method suited to the operation with qualified accounting input.