Applied Overhead

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DEFINITION of 'Applied Overhead'

A type of overhead that is recorded under the cost-accounting method. Applied overhead is a fixed charged to a specific production job or department within a company. Applied overhead stands in contrast to general overhead, such as utilities or rent. Other forms of applied overhead include depreciation and insurance.

INVESTOPEDIA EXPLAINS 'Applied Overhead'

Applied overhead is usually allocated out to various departments according to a specific formula. Hence, a certain amount of overhead is therefore applied to a given department, such as marketing. The percentage of overhead that is applied to a given department may or may not correlate to the actual amount of overhead that was incurred by that department.

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