Applied Overhead

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.

BREAKING DOWN '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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RELATED FAQS
  1. How does fixed overhead differ from varied overhead?

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  2. How do some contra account types reduce book value?

    Look at a brief example of how cost accounting treats overhead expenses, how those expenses are different from direct labor ... Read Answer >>
  3. How is overhead distributed through total absorption costing?

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  4. How does quantifying fixed overhead volume variance show whether a company is profitable ...

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