# How do you Calculate an Overhead Rate for a Small Surveying Business?

Calculating the overhead rate and percentage of a business essentially includes dividing the organization’s indirect expenses by direct expenses. As soon as a company figures out their overhead costs, it makes it easier for them to decide the prices for their products and services. This is necessary because it leads to a reduction in the prices of their products and services and allows them to stay competitive. The whole purpose of determining the overhead rate and percentage of expenses is eventually to decide the appropriate cost of products.

In order to calculate the overhead rate and percentage for small surveying businesses, there are few steps that companies can follow.

# Step 1 – Calculate the Sum of the Direct and Indirect Expenses

This is the primary step to find out the overhead rate in any company no matter their size. In order to calculate the direct expenses, align the cost of direct labor and direct material that is required to manufacture the products or services that the company offers. For example, if a company sells mobile phones, the cost of materials and labor directly paid to the workforce and everything else that is involved in the manufacturing will be included in the direct expenses. Direct expenses are directly proportional to the number of products manufactured each year. However, for indirect expenses, align all of the costs that are indirectly involved with the manufacturing of the products such as the sales and customer services department, taxes, marketing, administrative expenses, insurance, etc.

# Step 2 – Calculate the Overhead Rate

Once you have calculated the direct and indirect expenses of your company, the next step is to divide the sum of all direct expenses with that of all indirect expenses. The answer is the overhead rate.

# Step 3 – Calculate the Overhead Percentage

Once you have calculated the overhead rate of a small surveying business, next, you shall multiply the overhead rate with 100 to determine the overhead percentage.