Definition of Applied overhead:
Applied overhead is a type of overhead that is recorded under the cost-accounting method. Applied overhead is a fixed rate 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.
In cost accounting, fixed costs apportioned to departments or products according to a predetermined rate. Also called absorbed 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.
Meaning of Applied overhead & Applied overhead Definition