Enter the average overhead allocation rate and the total number of hours into the calculator to determine the applied overhead.

Applied Overhead Formula

The following formula is used to calculate an applied overhead.

AO = R * T
  • Where AO is the applied overhead ($)
  • R is the allocation rate ($/hr)
  • T is the total time of production (hr)

To calculate an applied overhead, multiply the allocation rate by the total production time.

Applied Overhead Definition

Applied overhead is a measure of the total cost of labor and overhead when a labor rate is applied to a total time of production.

Applied Overhead Example

How to calculate applied overhead?

  1. First, determine the allocation rate.

    Calculate the allocation rate of the labor.

  2. Next, determine the total time.

    Measure the total production time in hours.

  3. Finally, calculate the applied overhead.

    Calculate the applied overhead using the formula above.


What is applied overhead?

Applied overhead is a measure of the total cost of labor/overhead when a rate is applied to a certain task. In other words, it’s simply the overhead when looking at an activity level.