12:02 LTE ezto.mheducation.com E connect Crein Enterprises uses a predetermined

Question

12:02 LTE ezto.mheducation.com E connect Crein Enterprises uses a predetermined overhead rate of $21.40 per direct labor-hour. This predetermined rate was based on a cost formula that esmatd $171.200 of total manufacturing overhead for an estimated activity level of 8,000 direct labor-hours The company incurred aciual total manufacturing overhead costs of $172,500 and 8.250 total diect labor-hours during the period Required: 1. Determine the amount of underapplied or overapplied manfacturing 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 eflect of the underapplied or overapplied overhead on the company's gross margin for the period

Explanation / Answer

1 Manufacturing overhead applied =8250*21.4= 176550 Manufacturing overhead overapplied = 176550-172500= 4050 2 Gross margin would increase by $4050

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