Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 14

Explain why overhead might be overapplied in a given period.

Step 1 of 3

Over applied overhead:

Overhead refers to the indirect expenses which are not directly attributable to the business and hence, need to be allocated on some predetermined basis. Since overhead are applied on a predetermined basis, it can be over applied or under applied at the end of the period.

When Actual applied factory overhead is more than the actual factory overhead it is known as the over applied overhead.