Question

Osborn Manufacturing uses a predetermined overhead rate of $18.30 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $221,430 of total manufacturing overhead for an estimated activity level of 12,100 direct labor-hours. The company actually incurred $217,000 of manufacturing overhead and 11,600 direct labor-hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company's gross margin? By how much? 1. Manufacturing overhead 2. The gross margin would overapplied increase by by

Answer 1

Calculatiom of Applied Manufacturing overbed Actual direct > Reede kexronimed Overhead x Cabole tour Rale A 18.30 X 11600 - $ 212280 Calculation foves/urades applied Overbeed applied the comfostering - Actual manufacturing & 212280 - 8212000 3 $4720 Undex abblied Closing frokoy:- for under applied overheed LLORA I closed to cost Q goods sold Coat of Goods sold 84720 chering Overhead 84720 Since, Oveschead is underabblied, less Overhead hou been applied to invericey. To eliminate $ 4920 the above journal emkyu is passed. for, Hemce cost of goods soldis im crevued, Gross Marcin wild decrease by $ 4720

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