Make an overhead ledger
| Cost item | Period | Business amount | Allocation notes |
|---|---|---|---|
| Workspace cost | Monthly | ______ | Business portion only |
| Insurance | Monthly equivalent | ______ | Divide an annual planning amount by 12 |
| Software | Monthly | ______ | Record recurring charges |
| Utilities | Monthly | ______ | Separate any directly charged use |
| Equipment allowance | Monthly planning basis | ______ | Document the method; accounting treatment may differ |
This is an operational planning ledger, not a tax-deduction schedule. Ask your accountant how actual expenses and equipment should be reported. Never call all household bills business costs without an appropriate basis.
Worked capacity allocation
Suppose the fictional ledger totals $600 each month. You expect 100 billable production hours. A planning allocation is:
Overhead rate per billable hour = $600 ÷ 100 = $6/hour
An order using three billable hours receives $18 overhead. If the month yields only 60 such hours, that rate allocates $360 and leaves $240 unrecovered. The costs did not vanish when volume fell.
You might use orders, batches or another driver instead, but different jobs consume resources differently. A flat per-order allocation can make a highly detailed cake look cheaper than it really is. Choose a basis that fits the work and keep it consistent during the planning period.
Fixed and variable are planning distinctions
SBA's break-even framework separates fixed cost from variable cost and compares fixed cost with unit contribution. B01 Some costs may have both components. Identify the part that changes with production rather than assigning an entire bill by intuition.
When a box is charged directly to an order, leave that same box out of overhead. When electricity for a particular production task is separately charged, avoid allocating it again. A clean classification matters more than a long category list.
Update assumptions without rewriting history
Date the ledger and record the capacity estimate. Review the rate when ongoing costs or realistic production capacity change. Keep completed quotes tied to their original version; use updated assumptions for the next estimate.
Do not increase the denominator simply to obtain a more attractive low rate. If only 70 hours are realistically billable, planning for 140 does not create customers or available labor.
Limits and next use
Allocation is a planning method, not proof that a customer will pay the resulting price. Actual monthly accounts show whether the operation recovered its expenses.
Baker Quote — $29 one-time helps assemble order costs and customer quotes. Bring a documented overhead allowance rather than charging ongoing costs twice or leaving them invisible.