Final answer:
Manufacturing overhead can be underapplied or overapplied depending on the actual costs incurred compared to the allocated costs. To determine the amount of underapplied or overapplied manufacturing overhead, you would subtract the allocated overhead costs from the actual overhead costs.
Step-by-step explanation:
In manufacturing, overhead costs are those indirect costs that are not directly tied to the production of a specific product. These costs include rent, utilities, depreciation, and indirect labor. When manufacturing overhead is underapplied, it means that the actual overhead costs incurred are greater than the amount allocated or applied to the products. On the other hand, when manufacturing overhead is overapplied, it means that the actual overhead costs incurred are less than the amount allocated or applied to the products.
To determine whether manufacturing overhead was underapplied or overapplied, you would compare the actual overhead costs incurred to the overhead costs allocated or applied. If the actual costs are greater than the allocated costs, then manufacturing overhead is underapplied. If the actual costs are less than the allocated costs, then manufacturing overhead is overapplied.
To calculate the amount by which manufacturing overhead was underapplied or overapplied, you would subtract the allocated overhead costs from the actual overhead costs. The difference represents the amount by which manufacturing overhead was either underapplied or overapplied.