The total overhead assigned to actual production at any point in time is called: Applied overhead.
What is applied overhead?
Applied overhead can be defined as a non variable rate that a company applied to a particular production job or that is applied to a cost of production at a particular period of time.
It is important to note that applied overhead is not an indirect overhead expenses but rather a direct overhead expense.
Examples of applied overhead are:
- Rent
- insurance
- Staff compensation etc.
Applied overhead can be calculated using this formula
Applied overhead = Overhead rate × Actual driver usage
Therefore The total overhead assigned to actual production at any point in time is called: Applied overhead.
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