The formula to calculate the applied overhead is:
\[ \text{AO} = R \times T \]
Where:
Let's say the allocation rate is $50 per hour and the total time of production is 100 hours. Using the formula:
\[ \text{AO} = 50 \times 100 = 5000 \, \text{\$} \]
So, the applied overhead is $5000.
Definition: Total applied overhead is the total amount of overhead costs assigned to products or services.
Formula: \( \text{Total Applied Overhead} = \text{Overhead Rate} \times \text{Actual Activity} \)
Example: \( \text{Total Applied Overhead} = 5 \times 200 \)
Definition: Applied overhead cost is the amount of overhead cost assigned to products or services based on a predetermined rate.
Formula: \( \text{Applied Overhead} = \text{Predetermined Overhead Rate} \times \text{Actual Activity Base} \)
Example: \( \text{Applied Overhead} = 4.5 \times 150 \)
Definition: The overhead application rate is used to allocate overhead costs to products or services.
Formula: \( \text{Overhead Application Rate} = \frac{\text{Total Overhead Costs}}{\text{Total Activity Base}} \)
Example: \( \text{Overhead Application Rate} = \frac{9000}{3000} \)
