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Check my work Osborn Manufacturing uses a predetermined overhead rate of $19.70 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $265,950 of total manufacturing overhead for an estimated activity level of 13,500 direct labor-hours. The company actually incurred $260,000 of manufacturing overhead and 13,000 direct labor-hours during the period. ints eBook 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? Hint Print 1. Manufacturing overhead underapplied 2. The gross margin would decrease by byl $ 3,900 References

Answer 1

1	Manufacturing overhead	underapplied	by	3900
2	The gross margin would	decrease	by	3900

Workings

Manufacturing overhead incurred (a)	260000
Actual direct labor hrs	13000
Predetermined overhead rate	19.7
Manufacturing overhead applied (b)	256100
Underapplied overhead	3900
Because manufacturing overhead is underapplied, the cost of goods sold would increase by $3,900 and thegross margin would decrease by $3,900