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Osborn Manufacturing uses a predetermined overhead rate of$18.50 per direct labor-hour. This predetermined rate was based ona cost formula that estimates $227,550 of total manufacturingoverhead for an estimated activity level of 12,300 directlabor-hours.
The company incurred actual totalmanufacturing overhead costs of $221,000 and 11,800 total directlabor-hours during the period.
Required: 1. Determine the amount of underapplied or overappliedmanufacturing overhead for the period.
2. Assuming that the entire amount of the underapplied oroverapplied overhead is closed out to cost of goods sold, whatwould be the effect of the underapplied or overapplied overhead onthe company's gross margin for the period?
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Osborn Manufacturing uses a predetermined overhead rate of$18.50 per direct labor-hour. This predetermined rate was based ona cost formula that estimates $227,550 of total manufacturingoverhead for an estimated activity level of 12,300 directlabor-hours. |
The company incurred actual totalmanufacturing overhead costs of $221,000 and 11,800 total directlabor-hours during the period. |
| Required: | |
| 1. | Determine the amount of underapplied or overappliedmanufacturing overhead for the period. |
| 2. | Assuming that the entire amount of the underapplied oroverapplied overhead is closed out to cost of goods sold, whatwould be the effect of the underapplied or overapplied overhead onthe company's gross margin for the period? |
Related questions
Osborn Manufacturing uses a predetermined overhead rate of$19.90 per direct labor-hour. This predetermined rate was based ona cost formula that estimates $272,630 of total manufacturingoverhead for an estimated activity level of 13,700 directlabor-hours. |
The company incurred actual totalmanufacturing overhead costs of $270,000 and 13,200 total directlabor-hours during the period. |
| Required: | |
| 1. | Determine the amount of underapplied or overappliedmanufacturing overhead for the period. |
| 2. | Assuming that the entire amount of the underapplied oroverapplied overhead is closed out to cost of goods sold, whatwould be the effect of the underapplied or overapplied overhead onthe company's gross margin for the period? |
