Overapplied Overhead

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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Also, predetermined overhead rates are typically applied to production, and overhead variances for underapplied and overapplied overhead are to be expected.