The amount by which overhead incurred during a period exceeds the overhead applied to jobs is called:

• A. Estimated overhead
• B. Underapplied overhead
• C. Overapplied overhead
• D. Allocated overhead

Answer: (B)

Verified step by step guidance

1. Understand the concept of overhead: Overhead refers to indirect costs incurred during production, such as utilities, rent, and salaries of supervisors, which cannot be directly traced to specific jobs.
2. Learn the difference between applied overhead and incurred overhead: Applied overhead is the estimated overhead allocated to jobs based on a predetermined rate, while incurred overhead is the actual overhead costs incurred during the period.
3. Define underapplied overhead: Underapplied overhead occurs when the actual overhead incurred exceeds the overhead applied to jobs. This indicates that the company underestimated the overhead costs during the allocation process.
4. Define overapplied overhead: Overapplied overhead occurs when the overhead applied to jobs exceeds the actual overhead incurred. This indicates that the company overestimated the overhead costs during the allocation process.
5. Relate the problem to the definitions: The problem asks for the term describing the situation where overhead incurred exceeds overhead applied. Based on the definitions, this is referred to as 'Underapplied overhead.'