Underapplied Overhead

That one secretary handles servicing three lawyers. She costs $90,000 a year all in ($20,000 for benefits, her 225 square feet of office space, insurance, phone, and whatnot...$5,000 for IRA matching thing, and $65,000 in salary). Her costs are then applied to those three lawyers as $30,000 a year in their overhead. That would be "fair" reporting of overhead.

So then...what would be the "under" for overhead? Well, if in calculating the costs of those lawyers to the firm, the firm's accountant just looked at the secretary's salary in applying her real costs, that would be underapplied overhead. Politicians do this all the time when they quote various public servants' salaries or "costs," conveniently omitting the costs of their pensions and benefits and all the other stuff.