Osborn Manufacturing uses a predetermined overhead rate of $19.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $272,630 of total manufacturing overhead for an estimated activity level of 13,700 direct labor-hours. The company actually incurred $270,000 of manufacturing overhead and 13,200 direct labor-hours during the period. Required: 1. Calculate the underapplied or overapplied manufacturing overhead. 2. Assume the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the closing journal entry increase or decrease gross margin? By how much? 1. Manufacturing overhead 2. The gross margin would by by

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Osborn Manufacturing uses a predetermined overhead rate of $19.90 per direct labor-hour. This predetermined rate was based on a
cost formula that estimates $272,630 of total manufacturing overhead for an estimated activity level of 13,700 direct labor-hours.
The company actually incurred $270,000 of manufacturing overhead and 13,200 direct labor-hours during the period.
Required:
1. Calculate the underapplied or overapplied manufacturing overhead.
2. Assume the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the closing journal entry
increase or decrease gross margin? By how much?
1. Manufacturing overhead
2. The gross margin would
by
by
Transcribed Image Text:Osborn Manufacturing uses a predetermined overhead rate of $19.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $272,630 of total manufacturing overhead for an estimated activity level of 13,700 direct labor-hours. The company actually incurred $270,000 of manufacturing overhead and 13,200 direct labor-hours during the period. Required: 1. Calculate the underapplied or overapplied manufacturing overhead. 2. Assume the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the closing journal entry increase or decrease gross margin? By how much? 1. Manufacturing overhead 2. The gross margin would by by
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