Recruiter's Glossary

Examples: Deferred Tax • Hedge Accounting • Chart of Accounts

Overhead Allocation

Term from Accounting industry explained for recruiters

Overhead Allocation is a key accounting practice where business expenses that aren't directly tied to making specific products (like rent, utilities, or supervisor salaries) are fairly divided among different departments or products. It's like splitting a shared restaurant bill, but for business costs. Accountants use this to figure out the true cost of products or services, which helps in pricing decisions and understanding which parts of the business are profitable. This is part of cost accounting, and you might also hear it called "cost allocation" or "expense distribution."

Examples in Resumes

Implemented new Overhead Allocation methods that improved cost accuracy by 25%

Developed Cost Allocation systems for manufacturing plant with $5M annual overhead

Led team in restructuring Overhead Allocation processes across 3 business units

Typical job title: "Cost Accountants"

Also try searching for:

Cost Accountant Management Accountant Financial Analyst Cost Analyst Finance Manager Accounting Manager Controller

Where to Find Cost Accountants

Professional Organizations

Online Communities

Job Resources

Example Interview Questions

Senior Level Questions

Q: How would you handle a situation where departments are complaining about the current overhead allocation method?

Expected Answer: A senior accountant should discuss analyzing the current system's fairness, gathering stakeholder input, evaluating alternative allocation methods, and implementing changes with clear communication to all departments.

Q: What factors would you consider when updating an overhead allocation system?

Expected Answer: Should mention business size, complexity of operations, cost drivers, technology capabilities, reporting needs, and impact on department budgets. Should emphasize importance of fairness and accuracy.

Mid Level Questions

Q: Explain the difference between direct costs and overhead costs.

Expected Answer: Should explain that direct costs can be traced to specific products (like materials and labor), while overhead costs are shared expenses that need to be distributed (like rent and utilities).

Q: How do you determine appropriate allocation bases?

Expected Answer: Should discuss common bases like direct labor hours, machine hours, or square footage, and explain how to choose the most relevant basis for different types of overhead costs.

Junior Level Questions

Q: What is overhead allocation and why is it important?

Expected Answer: Should explain that it's the process of distributing shared business costs to different departments or products to understand true costs and make better business decisions.

Q: What are some common overhead costs in a business?

Expected Answer: Should list items like rent, utilities, supervision, maintenance, insurance, and explain these can't be directly tied to specific products.