Cretin Enterprises uses a predetermined overhead rate of $21.40 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $171,200 of total manufacturing overhead for an estimated activity level of 8,000 direct labor-hours.

The company incurred actual total manufacturing overhead costs of $172,500 and 8,250 total direct labor-hours during the period.

Required:
1.	Determine the amount of underapplied or overapplied manufacturing overhead for the period.(Input the amount as a positive value. Omit the "$" sign in your response.)

Manufacturing overhead (Click to select) underapplied overapplied

$

2.

Assuming that the entire amount of the underapplied or overapplied overhead is closed out to cost of goods sold, what would be the effect of the underapplied or overapplied overhead on the company's gross margin for the period? (Input the amount as a positive value. Omit the "$" sign in your response.)

The gross margin would (Click to select) increase decrease by

$