Overapplied Overhead

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Overapplied Overhead

In accounting, a record of the overhead for a work-in-process product that is greater than the overhead actually is. This may happen for any number of reasons. Because overapplied overhead means profits are higher than the records say they should be, it is added to a company's profit at the end of the accounting period. It is also called overabsorbed overhead. See also: Underapplied overhead.
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Although the company lost profit or fee due to direct cost overruns on their firm-fixed-price contract, and lost some fee or profit on their fixed-price-firm-target, and cost-plus-incentive-fee contracts due to direct cost (also due to cost overruns), these losses were made up by over-applied overhead, materials handling and G&A, and additional work fully reimbursed with additional fee on the labor-hour contract.