T-Mobile LTE 9:17 PM ezto.mheducation.com @ 17960. 16.66 points Osborn Manufactu
ID: 2402657 • Letter: T
Question
T-Mobile LTE 9:17 PM ezto.mheducation.com @ 17960. 16.66 points Osborn Manufacturing uses a predetermined overhead rate of $18.70 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $233,750 of total manufacturing overhead for an estimated activity level of 12,500 direct labor- hours. The company incurred actual total manufacturing overhead costs of $229,000 and 12,000 total direct labor-hours during the period. Required 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2 Assuming that the entire amount of the underapplied or overapplied overhead is closed out to cost of goods sold, what would be the effect of the underapplied or overapplied overhead on the company's gross margin for the period? Hints References eBook & Resources Hint Check my workExplanation / Answer
1.
Manufacturing overhead applied = Actual direct labor-hours x predetermined overhead rate
= $ 18.70 x 12,000 = $ 224,400
Manufacturing overhead incurred = $ 229,000
Manufacturing overhead under applied = $ 229,000 - $ 224,400 = $ 4,600
Manufacturing overhead under applied by $ 4,600
2.
Manufacturing overhead is under applied. If under applied overhead is closed out to cost of goods sold, the cost of goods sold will increase by $ 4,600 and consequently gross margin will decrease by the same amount.
The gross margin would decrease by $ 4,600
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