Ques value: 10.00 points Osborn Manufacturing uses a predetermined overhead rate

Question

Ques value: 10.00 points Osborn Manufacturing uses a predetermined overhead rate of $19.10 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $246,390 of total manufacturing overhead for an estimated activity level of 12,900 direct labor-hours The company 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 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? The gross margin would Hints References eBook & Resources Hint # Check my.wors

Explanation / Answer

Q OH rate: $ 19.10 per DLH Under /Over -applied overheads Actual manufacturing overheads 245000 Less: Overheads applied (12,400 DLH @ 19.10) 236840 Under-applied overheads 8160 Req 1: Manufacturing overheads underapplied by $ 8160 Req 2: Gross profit decreased by $ 8160 Q Total manufacturing cost: Material issued 17704 Direct labour cost 10600 OH applied ($ 10600 *116%) 12296 Total manufacturing cost: 40600 Divide: Number of units 1400 Cost per unit 29 Req a: Total manufacturing cost: $ 40,600 Req b: Units [roduct cost for Job 313: $ 29 per unit Q OH rate: $ 6596 /9700 *100= 68% of Labour cost (based on OH charged in another job) OH to be charged on Job W: Direct labour cost:       $ 6000 OH rate:                          68% of direct labour cost OH to be charged to Job W: $ 6000 *68% = $ 4080

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