Question

Exercise 3-4 Underapplied and Overapplied Overhead [LO3-4] Osborn Manufacturing uses a predetermined overhead rate of $19.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $249,600 of total manufacturing overhead for an estimated activity level of 13,000 direct labor-hours. The company actually incurred $247000 of manufacturing overhead and 12,500 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 by by

Answer 1

Dear Student
Thank you for using homeworklib
Please find below the answer
Statementshowing Computations
Paticulars	Amount
Predetermined overhead rate	19.20
Actual labour hours	12,500.00
Applied overhead = 19.20 *12500	240,000.00
Actual Overhead	247,000.00
Underapplied overhead = 240,000 - 247,000	7,000.00
1)Manufacturing overhead underapplied by $7,000
2)
Gross margin would decrease by $7,000