1.
Predetermined overhead rate = $19.70 per direct labor hour
Actual direct labor hours = 13,000
Applied manufacturing overhead = Actual direct labor hours x Predetermined overhead rate
= 13,000 x 19.70
= $256,100
Actual manufacturing overheads = $260,000
Under applied manufacturing overhead = Actual manufacturing overhead - Applied manufacturing overheads
= 260,000-256,100
= $3,900
2.
When under applied manufacturing overhead is closed to cost of goods sold, it would increase cost of goods sold and thus gross margin will decrease by $3,900.
1. | Manufacturing overhead | under applied | by | $3,900 |
2. | The gross margin would | decrease | by | $3,900 |
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Exercise 3-4 Underapplied and Overapplied Overhead (LO3-4) Osborn Manufacturing uses a predetermined overhead rate of $19.70...
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