Add overhead to product cost

Rent, power, depreciation and insurance are neither material nor wage, yet a product would not exist without them. Keelvy charges them onto products by the hours each product takes, so a quick refill is not charged what a slow, hand-poured candle is.

How the charge is worked out

Overhead is charged by hours, never by units made or sold. A product’s share is its own hours times a rate, and the rate is the overhead in the period divided by the normal hours of that period, not the hours actually worked. Dividing by actual hours would make every product look dearer in the month you made least. What the pool fails to absorb is reported as Not absorbed on the period instead of being smeared into unit costs, and it reaches the profit and loss as Under-absorbed overhead, closed to cost of sales, never to stock.

Set up the categories

A new workspace starts with expense categories an accountant knows without being taught, such as rent, postage and delivery, advertising and accounting. Each already says whether it goes into product cost. To change them, open Settings → Overhead categories, or click Manage categories on the Overhead screen. On a category:

Goes into product cost: turn off for marketing, sales and administration.
Fixed cost: turn off when the amount follows how much you make.
Spread across products by: Hours worked, Machine hours, Occupancy hours, Value of goods bought, or Already a direct cost. Choose the last when the spend is already inside an equipment rate or a production wage, so it is not counted twice.
Divided by: the capacity figure behind the rate.

To merge two categories, use Merge into…. Every booking follows, so the list stays short enough to read.

Say what normal capacity is

Open Finance & team → Overhead. In Period allocation, set the capacity figures the rates divide by:

Normal person-hours: available person-hours in a month, everyone together. Three people at 170 hours each is 510. It grows when you hire. Until you set it, no overhead reaches product costs.
Normal machine hours: for categories spread by machine hours.
Normal calendar hours: for categories spread by occupancy. It does not grow when you hire, because drying carries on overnight.
Normal purchases: what you normally buy in a month, in money, for warehousing and receiving costs spread by the value of goods bought.

The Period of spend picks which months of overhead go into the pool, from Last 1 month to All time, and stretches normal capacity over the same months. It is a period, not a method. A different period can be previewed without changing the default.

Record the spend

Click Record overhead, choose the Category, Amount, Currency and Incurred on, and add a Note. Overhead entries lists them.

Read the result

The allocation shows Total overhead, Overhead per person-hour (and per machine hour or occupied hour), Hours actually worked, Absorbed by products, and Not absorbed or Absorbed above the spend. Spend already counted in machine rates shows as Already in machine rates and is not spread again. Anything in another currency shows as not allocated.

If the workspace has a go-live date, the figures count from it.