If manufacturing overhead has been underallocated during the year, it means the jobs have been undercosted.

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Manufacturing overhead is a part of the total cost of producing a product, along with direct materials and direct labor. If manufacturing overhead has been underallocated, it means that not enough overhead costs have been assigned to each job. This in turn means that the total cost of each job has been underestimated or undercosted, which can lead to inaccuracies in pricing and profitability analysis.

If Manufacturing Overhead Has Been Underallocated During the Year, It