How this calculation works
Products can consume overhead activities in different proportions from their output units. Activity-based costing allocates each entered pool using its own driver rather than spreading all overhead through one undifferentiated rate. This page follows one product’s use of several activity pools. It separately shows pool rates, assigned overhead and the resulting per-product-unit cost with entered direct cost.
Pool driver rate = pool cost/total driver units; product overhead = sum(driver rate × product usage)A worked example
A setup pool costing one thousand over ten setups has rate one hundred per setup. Two product setups assign two hundred. A machine pool costing two thousand over one hundred driver units has rate twenty; ten units assign another two hundred. Total assigned overhead is four hundred. For one hundred product units and direct period cost six hundred, overhead is four per unit and combined entered cost ten per unit.
Good to know
Unused capacity, cost causality, multiple products and overhead-recovery reconciliation are not automatically estimated. This page allocates the supplied pool rates to one product’s stated use. It does not recommend a selling price or establish tax or financial-reporting compliance. Explain the pool boundaries and driver evidence before using the result for business decisions.
Reference: OpenStax — activity based product costs (opens in a new tab) ↗
What this calculation answers
Products can consume overhead activities in different proportions from their output units. Activity-based costing allocates each entered pool using its own driver rather than spreading all overhead through one undifferentiated rate.
This page follows one product’s use of several activity pools. It separately shows pool rates, assigned overhead and the resulting per-product-unit cost with entered direct cost.
The Joint product cost allocation at split off calculator allocates one common process cost across co-products. Activity-based costing instead assigns separate activity pools through their drivers.
Use the right input conventions
Each pool supplies a total period cost and total driver volume. Product usage follows the same pool order and cannot exceed the pool’s total driver units. Keep costs and activity quantities within one consistent period.
Direct cost is a complete product-period amount, not an amount per finished unit. Product output units divide that total plus assigned overhead only after the allocation is complete.
Interpret the result
A driver rate is currency per activity unit, such as per setup or machine-hour. It should not be added directly to a rate measured in another driver unit. The assigned currency amounts can be summed after multiplication by the matching usage.
The tool checks arithmetic consistency but cannot prove that the selected activity driver causes the cost. An allocation can be internally correct while its driver model remains inappropriate.
Work through the example
A setup pool costing one thousand over ten setups has rate one hundred per setup. Two product setups assign two hundred. A machine pool costing two thousand over one hundred driver units has rate twenty; ten units assign another two hundred.
Total assigned overhead is four hundred. For one hundred product units and direct period cost six hundred, overhead is four per unit and combined entered cost ten per unit.
Where the model stops
Unused capacity, cost causality, multiple products and overhead-recovery reconciliation are not automatically estimated. This page allocates the supplied pool rates to one product’s stated use.
It does not recommend a selling price or establish tax or financial-reporting compliance. Explain the pool boundaries and driver evidence before using the result for business decisions.
A few questions, answered
Why can I not enter per-unit direct cost in the direct-cost field?
The field is a period total, which is divided by output units after adding the assigned overhead.
What changes in the comparison?
Double this product’s activity use while leaving output and direct costs unchanged.