Overhead application to costs is a critical issue for the costing of your products. We are studying several ways to handle this situation.

• Describe overhead and the overhead application process.
• What would cause an overhead to be overapplied, or underapplied.
• Discuss the results to your decision making and the financial statements for each of those two situations.
• Describe how the over or under application of overhead should be corrected in the accounting records.