C&E uses a predetermined overhead rate of $21.40 per direct labour-hour. This predetermined rate was based on a cost formula that estimated $342,400 of total manufacturing overhead for an estimated activity level of 16,000 direct labour-hours. The company incurred actual total manufacturing overhead costs of $345,000 and 16,500 total direct labour-hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. (5 Marks] 2. What would be the effect of the underapplied or overapplied overhead computed in part have on the company's gross margin for the period? [2 Marks]