I searched PMBOK 5th Edition and found no clear statement on the handling of overhead.
The General Services Administration (GSA) governs contracting with the US Federal government. The GSA Federal Acquisition Regulation Part 16.6 Time-and-Materials, Labor-Hour, and Letter Contracts states:
(b) Description. A time-and-materials contract provides for acquiring supplies or services on the basis of:
(1) Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; ...
Overhead is applicable solely to labor costs. Overhead is not permitted for other direct costs (ODCs) which GSA's term for non-labor costs.
“Direct materials” means those materials that enter directly into the end product, or that are used or consumed directly in connection with the furnishing of the end product or service.
(1) Direct materials, including supplies transferred between divisions, subsidiaries, or affiliates of the contractor under a common control;
(2) Subcontracts for supplies and incidental services for which there is not a labor category specified in the contract;
(3) Other direct costs (e.g., incidental services for which there is not a labor category specified in the contract, travel, computer usage charges, etc.); and
(4) Applicable indirect costs.
Although the offeror is not permitted to apply overhead and G&A to ODCs, the offeror can apply material handling costs, as follows:
(3) Material handling costs. When included as part of material costs, material handling costs shall include only costs clearly excluded from the labor-hour rate. Material handling costs may include all appropriate indirect costs allocated to direct materials in accordance with the contractor's usual accounting procedures consistent with Part 31.