Osborn Manufacturing uses a predetermined overhead rate of 1

Osborn Manufacturing uses a predetermined overhead rate of $18.90 per direct labor-hour. This predetermined rate was based on a cost formule thet estimates $240.030 of total manufacturing The company actually incurred $237,000 of manufacturing overhead and 12,200 direct labor hours during the period Required: 1. Determine the amount of overhead for an estimated activity level of 12,700 direct labor-hours underapplied or overapplied manufacturing overhead for the period 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? by by 2 The gross mergin would here to search F4 F5 F6 F8 F9 F10F11 F1

Solution

Actual no. of labor hours = 12,200

Predetermined overhead rate = $18.90

Overhead applied = $18.90 x 12,200 = $230,580

Actual Overhead incurred = $237,000

Since overhead applied is less than the actual overhead, the overhead is underapplied.

1. Manufacturing Overhead is underapplied by $6,420 ($237,000 - $230,580)

2. Since the overhead is underapplied, COGS (Cost of goods sold) is to be debited with the underapplied amount of $6,420. Entry to dispose off underapplied overhead would decrease the company\'s gross margin by $6,420