Cretin Enterprises uses a predetermined overhead rate of $53$ per machine hour. This predetermined rate was based on $20,000$ estimated direct machine$-$hours and $$60,000$ of estimated total manufacturing overhead.

The company incurred actual total manufacturing overhead costs of $$64,500$ and $18\mathrm{.}500$ total machine$-$hours during the period. There were no beginning inventories, and all goods produced in the period were shipped out to customers before period$-$end.

Required:

$1.$ Determine the amount of underapplied or overapplied manufacturing overhead for the period.

$2.$ What is the effect on gross margin for the period?

EXERCISE $5-10$

Schedules of Cost of Goods Manufactured and Cost of Goods Sold $(2106]$

The following data from the just$-$completed year are taken from the accounting records of Eccles Company: