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Methodology

Project Overhead Recovery Planner methodology

Turn period overhead and productive capacity into an hourly recovery rate, then compare required project recovery with overhead already billed.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Overhead rate per productive hour
overheadRatePerHourExTax = period overhead ÷ period productive hours

Where

overheadPerPeriodExTax
Overhead for the period (currency units/period, ex tax)Source: Business record
productiveHoursPerPeriod
Productive hours for the period (hours/period)Source: Business record
overheadRatePerHourExTax
Overhead rate per productive hour (currency units/productive hour, ex tax)Source: Calculated output
Project overhead required
projectOverheadRequiredExTax = overhead rate per hour × project hours

Where

projectHours
Project hours (hours/project)Source: Business record
overheadRatePerHourExTax
Overhead rate per productive hour (currency units/productive hour, ex tax)Source: Calculated output
projectOverheadRequiredExTax
Project overhead required (currency units, ex tax)Source: Calculated output
Overhead recovery gap
recoveryGapExTax = overhead billed − project overhead required

Where

overheadBilledExTax
Overhead billed to the project (currency units/project, ex tax)Source: Business record
projectOverheadRequiredExTax
Project overhead required (currency units, ex tax)Source: Calculated output
recoveryGapExTax
Overhead recovery gap (currency units, ex tax)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

The rows below come directly from the exact engine using the visible default fixture.

Overhead for the period
24,000 currency units/period, ex tax
Productive hours for the period
1,200 hours/period
Project hours
40 hours/project
Overhead billed to the project
700 currency units/project, ex tax

Calculation and outputs

  1. Overhead rate per productive hour

    overheadRatePerHourExTax = period overhead ÷ period productive hours
    Overhead for the period
    24,000 currency units/period, ex tax
    Productive hours for the period
    1,200 hours/period
    Project hours
    40 hours/project
    Overhead billed to the project
    700 currency units/project, ex tax
    Project overhead required
    800 currency units, ex tax
    Overhead recovery gap
    -100 currency units, ex tax

    Engine result: 20 currency units/productive hour, ex tax

  2. Project overhead required

    projectOverheadRequiredExTax = overhead rate per hour × project hours
    Overhead for the period
    24,000 currency units/period, ex tax
    Productive hours for the period
    1,200 hours/period
    Project hours
    40 hours/project
    Overhead billed to the project
    700 currency units/project, ex tax
    Overhead rate per productive hour
    20 currency units/productive hour, ex tax
    Overhead recovery gap
    -100 currency units, ex tax

    Engine result: 800 currency units, ex tax

  3. Overhead recovery gap

    recoveryGapExTax = overhead billed − project overhead required
    Overhead for the period
    24,000 currency units/period, ex tax
    Project hours
    40 hours/project
    Overhead billed to the project
    700 currency units/project, ex tax
    Overhead rate per productive hour
    20 currency units/productive hour, ex tax
    Project overhead required
    800 currency units, ex tax

    Engine result: -100 currency units, ex tax

Example

The rows below come directly from the exact engine using the visible default fixture.

Overhead rate per productive hour
20.00
Project overhead required
800.00
Overhead recovery gap
-100.00

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

The overhead pool and recovery base must be mutually consistent and must not duplicate direct job costs.

3. Validation and boundary checks

  • All values must be finite and remain inside the visible input boundaries.
  • All money values use one consistent ex-tax basis and period.
  • Rates must remain inside their engine-owned boundaries.
Overhead for the period minimum
overheadPerPeriodExTax ≥ 0 currency units/period, ex tax — A lower value is rejected before calculation.
Overhead for the period maximum
overheadPerPeriodExTax ≤ 10,000,000 currency units/period, ex tax — A higher value is rejected before calculation.
Productive hours for the period minimum
productiveHoursPerPeriod ≥ 0.01 hours/period — A lower value is rejected before calculation.
Productive hours for the period maximum
productiveHoursPerPeriod ≤ 100,000,000 hours/period — A higher value is rejected before calculation.
Project hours minimum
projectHours ≥ 0 hours/project — A lower value is rejected before calculation.
Project hours maximum
projectHours ≤ 100,000,000 hours/project — A higher value is rejected before calculation.
Overhead billed to the project minimum
overheadBilledExTax ≥ 0 currency units/project, ex tax — A lower value is rejected before calculation.
Overhead billed to the project maximum
overheadBilledExTax ≤ 10,000,000 currency units/project, ex tax — A higher value is rejected before calculation.

4. Assumptions and source classification

  • All hours, utilisation, costs, rates and recovery targets are supplied by the user.
  • Money values use one consistent ex-tax basis.
  • No provider fee, jurisdiction, benchmark or demand forecast is embedded.
  • Raw engine precision is retained until display.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • Results depend on the completeness and classification of the entered business records.
  • The planner does not forecast demand, utilisation, supplier terms or project outcomes.
  • This is educational business decision support rather than accounting, tax, legal or financial advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the Project Overhead Recovery planner and methodology.

Related reading

Guides to interpret the decision and its assumptions.

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