Overhead Allocation

Why allocate overhead at all

Direct margin (revenue − COGS − fees − shipping) tells you whether each order pays for itself. But it doesn't pay your rent, your warehouse staff, or your accounting software. A product can look profitable on direct margin and still be a money-loser once you spread fixed costs across it. Overhead allocation lets you model fully-loaded per-SKU margin so you make pricing and discontinuation decisions on the real number.

Configuring monthly overhead

Go to Admin → Reports → Overhead. Click New overhead entry and fill in: amount (monthly $), label (e.g. "Warehouse rent + utilities"), method (units / revenue / weight), and effective dates. You can have multiple concurrent entries—e.g. one for rent allocated by units, another for software allocated by revenue. ShipWave sums all active entries for each month when computing per-SKU allocation.

The three methods

units — Total monthly overhead ÷ total units shipped that month. Each unit shipped carries an equal share. Best for warehouse/labor costs that scale with pick volume.
revenue — Each order's share = (order revenue / total monthly revenue) × total overhead. Best for marketing-like costs that scale with how much you sell, not how many.
weight — Each unit's share is proportional to its weight. Best for storage costs in a warehouse where heavier items take more space.

You can mix methods across entries: rent allocated by units, software allocated by revenue. ShipWave applies each entry's method independently and sums into a single per-order overhead figure.

Effective-from / effective-to date ranges

Every overhead entry has a start date and an optional end date. This is critical for accuracy when costs change—if your rent jumped from $5K to $7K in March, you create a new entry ending the old one Feb 28 and starting the new one March 1. Historical months stay allocated at their actual rate; new months pick up the new rate. The system never restates closed months.

How it shows up

Once configured, overhead appears as a gray segment on the profitability dashboard stacked bar. The per-SKU drill-down shows allocated overhead in a dedicated column. The negative_post_overhead opportunity (see Opportunities Found) uses these allocations to flag SKUs that look fine on direct margin but lose money fully loaded.

FAQs

What if I have no overhead configured?

The overhead column is just zero everywhere. Direct margin = net margin in that case. Most accounts at least configure rent/utilities to get a more realistic picture.

Can I retroactively allocate overhead to past months?

Yes, by setting the effective_from date in the past. ShipWave reallocates that month's overhead and refreshes profitability. Snapshotted inventory valuations don't change—only profitability does.

Should I include payroll?

Include the portion of payroll that's not already in MO labor costs (see <a href="/help/bom-and-manufacturing-orders">BOMs and Manufacturing Orders</a>). Warehouse picker wages and office staff salaries typically belong in overhead.

What method should I start with?

For most accounts, units is the simplest and gives a reasonable picture. Switch to revenue or weight only if you have a clear reason (e.g. heavy/light SKU mix with very different storage cost).