Is applied overhead a budgeted or actual number?

Applied overhead refers to the overhead costs that have been allocated to production based on a predetermined overhead rate. This rate is typically derived from budgeted figures and is applied to actual production levels during a given period.

The correct understanding is that applied overhead is based on budgeted overhead rates but is applied to the level of actual activity (such as machine hours or labor hours) that occurs during the period. This means that while the rate itself comes from budgeted figures, the actual amount applied can vary depending on how much of that activity occurs. Thus, it can be seen as a combination of both budgeted and actual components, aligning with the notion of "half and half."

This dual nature reflects the purpose of applied overhead: to match estimated costs with actual production levels to maintain cost control and improve decision-making in operations management.