Overhead or Indirect Cost Allocation in the home workshop

If you are running your woodshop for revenue, you need to know about overhead, or indirect cost.  Let's start with a list of what 'overhead' or 'indirect cost' items are so you get an idea of what they are, and to see how fast these 'little things' can add up in running your shop. The list below is just an example. Your list will vary depending on the kind or work, and supplies you use in your shop:

The list above is just for the usual 'consumable' supplies in your shop.  Good overhead cost allocation also includes a portion of the cost for larger power tools as well:

Once you get an idea of what your overhead application rate is, or how much you should add-on when when pricing a project for overhead or indirect cost, your shop will be more profitable because you are covering all of your costs of production.

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