Enter the average overhead allocation rate and the total number of hours into the calculator to determine the applied overhead.
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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?
- First, determine the allocation rate.
Calculate the allocation rate of the labor.
- Next, determine the total time.
Measure the total production time in hours.
- Finally, calculate the applied overhead.
Calculate the applied overhead using the formula above.
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.