Managing expenses is a key for business success, and overhead costs play a pivotal role in realizing favorable profit margins. Almost all companies have some form of overhead consisting of specific categories of indirect expenses. The better organizations are able to manage overhead costs, the more competitive they are in the marketplace. It is incumbent in the Controller’s role to effectively manage, monitor and perform ongoing assessment of overhead costs, allocations and rates.

Overhead refers to the ongoing business expenses not directly attributed to creating a product or service. A company must pay overhead on an ongoing basis, regardless of how much or how little the company sells. It is important for budgeting purposes but also for determining how much a company must charge for its products or services to make a profit.

Overhead can be fixed, variable, or a hybrid of both. There are different categories of overhead, such as administrative overhead, which includes costs related to managing a business. In short, overhead is any expense incurred to support the business while not being directly related to a specific product or service.

Learning Objectives
  • Explore and understand overhead costs.
  • Discover and examine types of fixed and variable overhead costs.
  • Identify and understand overhead rates and allocation methods.
  • Explore overhead allocation measures and overhead rate calculation.
  • Explore activity-based costing.
  • Recognize and review responsibilities of the controller for overhead costs.
Last updated/reviewed: August 14, 2023

Included In Certifications

This course is included in the following Certification Programs:

20 CoursesThe Controllership Series Certification

  1. The Controllership Series: The Controller Function - Elevating the Role
  2. The Controllership Series: The Controller Function - Strategic and Annual Planning
  3. The Controllership Series: The Controllers Role in Financial Forecasting
  4. The Controllership Series: Future Role of the Controller – Part 1
  5. The Controllership Series: Future Role of the Controller – Part 2
  6. The Controllership Series: The Controller Function - Cash and Investments
  7. ASC 842 Accounting for Leases - Deep Dive
  8. The Controllership Series: The Controller Function - Inventory Part 1
  9. The Controllership Series: The Controller Function - Inventory Part 2 - Inventory Valuation, Physical Inventory Methods and Inventory fraud
  10. The Controllership Series: Overhead, Direct and Indirect Costs and Allocation Methods
  11. The Controllership Series: Financial Statement Preparation and Presentation
  12. The Controllership Series: The Controllers Role in the Procurement Function
  13. The Controllership Series: The Role of The Controller in ESG
  14. The Controllership Series: The Controllers Role in Pro Forma Financials
  15. The Controllership Series: The Controllers Role in Data Analytics and Big Data
  16. The Controllership Series: Introduction to the Financial Close Process
  17. The Controllership Series: Managerial Accounting Basics and Cost Principles
  18. The Controllership Series: Sales, Collections and Customer Credit
  19. The Controllership Series: Addressing Cash Flow and Forecasting Uncertainty
  20. Tools for The Controllership Series Certificate
25 Reviews (132 ratings)

Reviews

4
Anonymous Author
The course provided a good basis for understanding overhead. Overhead is not only important in the recognition of costs associated with the delivery/manufacturing of goods and services but in the recognition of costs associated with PP&E (internal use software and the design and installation of capital equipment).
5
Member's Profile
I love this Controllership series. Lynn you are a wonderful instructor with a knack for expressing content clearly and concisely. See you again soon in another course. Larry
4
Anonymous Author
Nice summary of the different costs and allocation methods. Lynn Fountain is good at giving the appropriate amount of information in an understandable and organized fashion.
5
Anonymous Author
Great overview of the various allocation methods that are available to controllers to leverage and re-analyze if the current allocation method is appropriate or not.
4
Anonymous Author
I enjoyed learning about overhead and different allocation methods. Was a good refresher on things I should be looking at and what my role in these costs should be.
4
Member's Profile
This course provides a lot to consider when it comes to overhead. One worthy of a review for anyone responsible for accounting in a manufacturing environment.
4
Member's Profile
reasonable breakdown of overhead with some generally useful background on how a company could manage and control it to improve business results.
5
Member's Profile
Lynn’s Controllership Series course on Overhead, including Direct and Indirect allocation Methods was well presented!
4
Member's Profile
This one was ok even though it does not pertain to what I do. Still having to manually write in page numbers.
5
Anonymous Author
Good overview and refresher of overhead and direct and indirect cost. Good series to take as a refresher.
5
Anonymous Author
Excellent refresher on overhead costs, direct and indirect costs, and the various allocation methods.
4
Anonymous Author
Good overview of overhead costs and allocation methods. PDF of slides is very useful as a reference.
5
Member's Profile
This was a good refresher for me. Not too basic, but hitting the underlying important concepts.
4
Anonymous Author
Good overview of overhead and allocation methods, broad high-level and helps refresh this area
5
Anonymous Author
Quick overview of overhead and allocation methods. Good to break this into it's own lesson.
4
Anonymous Author
This course was a little basic but still always learn something new with this instructor.
5
Anonymous Author
I enjoyed this course and the material provided, it was both engaging and informative.
3
Anonymous Author
Good overview of overhead and activity costing. Basic and helpful at the same time.
4
Anonymous Author
Good refresher on various costing methods and the different costing components.
5
Anonymous Author
Good overalll content.
5
Member's Profile
Good course on overhead costs and ways to make them more efficient.
5
Member's Profile
Great review of overhead and proper allocation of those expenses.
5
Member's Profile
A very good course to refresh knowledge about costs allocations.
5
Anonymous Author
Great intro to cost and allocation methods. Highly recommend.
4
Anonymous Author
Presenter was thorough and course content was appropriate.
show all reviews
Prerequisites
Course Complexity: Foundational

No advanced preparation or prerequisites are required for this course.

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
  Course Overview CPE
Course Syllabus
INTRODUCTION AND OVERVIEW
  Introduction to Overhead, Direct and Indirect Costs and Allocation Methods2:53
  Overhead Cost5:45
  Fixed and Variable Overhead Costs3:52
  Understanding Overhead Rates and Allocation Methods8:28
  Allocation Measures and Overhead Rate Calculation4:08
  Activity Based Costing13:00
  Responsibilities of The Controller13:01
  Summary1:00
CONTINUOUS PLAY
  Overhead, Direct and Indirect Costs and Allocation Methods52:07
SUPPORTING MATERIAL
  Slides: The Controllership Series: Overhead, Direct and Indirect Costs and Allocation MethodsPDF
  The Controllership Series: Overhead, Direct and Indirect Costs and Allocation Methods Glossary/ IndexPDF
REVIEW AND TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam