Question

Saved 1 Help Save & Ein A manufacturing uses a predetermined overhead rate of $19.50 per direct labor-hour. This predetermined rate was based on a cout formula that estimates $259,350 of total manufacturing overhead for an estimated activity level of 3,300 direct labor hours The company actually incurred $253,000 of manufacturing overhead and 12,800 direct labor hours during the period 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 close the underapplied or overapplied overhead increase or decrease the company's gross margin? By how much (All answers are whole numbers - unless specified otherwise. You should NOT include the sign or a comma E. you should type 1000 for one thousand. Negative numbers should be added with a minus sign, eg.-1000 for a decrease or loss of one thousand) 055 ON 1. Manufacturing overhead 2. The gross margin would underapplied $ 3.400 by by

Answer 1

Question 1:

(i) Manufacturing Overhead

Applied manufacturing overheads = Predetermined overhead rate * Actual direct labor hours

Applied manufacturing overheads = $19.50 * 12,800 direct labor hours = $249,600

Under or overapplied overheads = Applied manufacturing overheads - Actual manufacturing overheads

Underapplied overheads = $249,600 - $253,000 = $3,400

(ii) Gross margin

Underapplied overheads is charges to cost of goods sold by adding. When cost of goods sold increases, gross margin decreases.

The gross margin would decrease by $3,400

Answer: 1. Manufacturing overhead Underapplied by $3,400 2. The gross margin would decrease by $3,400

Question 2:

(i) Plantwide predetermined overhead rate

Plantwide predetermined overhead rate = Total Manufacturing overheads / Total direct labor hours

Plantwide predetermined overhead rate = $4,536,000 / 252,000 direct labor hours = $18.00 per direct labor hour

Manufacturing overhead applied

Job A = 15 direct labor hours * $18.00 per direct labor hours = $270.00

Job B = 9 direct labor hours * $18.00 per direct labor hours = $162.00

(ii) Departmental predetermined overhead rate

Departmental predetermined overhead rate = Departmental Manufacturing overheads / Departmental base quantity

Machining = $4,212,000 / 234,000 machine hours = $18.00 per machine hour

Assembly = $324,000 / 234,000 direct labor hours = $1.38 per direct labor hour

Manufacturing overhead applied

Job A = (11 machine hours * $18.00 per machine hours) + (10 direct labor hours * $1.38 per direct labor hour) = $211.80

Job B = (12 machine hours * $18.00 per machine hours) + (5 direct labor hours * $1.38 per direct labor hour) = $222.90

Answer: 1. Manufacturing overhead applied Job A = $270.00 Manufacturing overhead applied Job B = $162.00 2. Manufacturing overhead applied Job A = $211.80 Manufacturing overhead applied Job B = $222.90

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