Osborn cost formula that estimates 243200 of total manufactu

Osborn cost formula that estimates $243,200 of total manufacturing overhead for an estimated activity level of 12,800 direct labor-hours. Manufacturing uses a predetermined overhead rate of $19.00 per direct labor-hour. This predetermined rate was based on a The company actually incurred $241,000 of manufacturing overhead and 12.300 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

Solution

Answer 1 Amount of applied manufacturing overheads = Predetermined overhead application rate * Actual direct labour hours during the period Amount of applied manufacturing overheads = $19 * 12300 direct labour hours = $2,33,700 Amount of underapplied manufacturing overheads = Actual Manufacturing overheads - Applied manufacturing overheads = $241000 - $233700 = $7,300 Answer 2 Journal entry to dispose of underapplied manufacturing overheads Date Account Titles and Explanation Debit Credit Cost of goods sold $7,300 Manufacturing Overheads $7,300 Impact of Gross margin The Gross Margin would decrease by $7300