Exercise 3-7 Underapplied and Overapplied Overhead [LO3-7]Osborn Manufacturing uses a predetermined overhead rate of $19.10per direct labor-hour. This predetermined rate was based on a costformula that estimates $246,390 of total manufacturing overhead foran estimated activity level of 12,900 direct labor-hours. Thecompany incurred actual total manufacturing overhead costs of$245,000 and 12,400 total direct labor-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?
Exercise 3-7 Underapplied and Overapplied Overhead [LO3-7]Osborn Manufacturing uses a predetermined overhead rate of $19.10per direct labor-hour. This predetermined rate was based on a costformula that estimates $246,390 of total manufacturing overhead foran estimated activity level of 12,900 direct labor-hours. Thecompany incurred actual total manufacturing overhead costs of$245,000 and 12,400 total direct labor-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?