Exercise 3-4 (Algo) Underapplied and Overapplied Overhead [LO3-4] Osborn Manufacturing uses a predetermined overhead rate of $19.70 per direct labor-hour. This predetermined rate was based on a ost formula that estimates $265,950 of total manufacturing overhead for an estimated activity level of 13,500 direct labor-hours. he company actually incurred $260,000 of manufacturing overhead and 13,000 direct labor-hours during the period. equired: Calculate the underapplied or overapplied manufacturing overhead. 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? Manufacturing overhead The gross margin would underapplied decrease by $ 3,900 by
Exercise 3-4 (Algo) Underapplied and Overapplied Overhead [LO3-4] Osborn Manufacturing uses a predetermined overhead rate of $19.70 per direct labor-hour. This predetermined rate was based on a ost formula that estimates $265,950 of total manufacturing overhead for an estimated activity level of 13,500 direct labor-hours. he company actually incurred $260,000 of manufacturing overhead and 13,000 direct labor-hours during the period. equired: Calculate the underapplied or overapplied manufacturing overhead. 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? Manufacturing overhead The gross margin would underapplied decrease by $ 3,900 by
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 3-4 (Algo) Underapplied and Overapplied Overhead [LO3-4]
Osborn Manufacturing uses a predetermined overhead rate of $19.70 per direct labor-hour. This predetermined rate was based on a
cost formula that estimates $265,950 of total manufacturing overhead for an estimated activity level of 13,500 direct labor-hours.
The company actually incurred $260,000 of manufacturing overhead and 13,000 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
underapplied
decrease
by $ 3,900
by](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9737efd-391f-457a-98f6-aa044a0527f1%2F935156c2-43b4-4bf1-a258-b8e1f059e7d9%2Focczodg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 3-4 (Algo) Underapplied and Overapplied Overhead [LO3-4]
Osborn Manufacturing uses a predetermined overhead rate of $19.70 per direct labor-hour. This predetermined rate was based on a
cost formula that estimates $265,950 of total manufacturing overhead for an estimated activity level of 13,500 direct labor-hours.
The company actually incurred $260,000 of manufacturing overhead and 13,000 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
underapplied
decrease
by $ 3,900
by
![The following an applies to the questions displayed below.j
Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were
as follows:
Raw materials
Work in process
Finished goods
$ 84,500
$ 35,000
$ 44,100
The company applies overhead cost to jobs using direct labor-hours. For this year, the company's predetermined
overhead rate of $12.50 per direct labor-hour was based on a cost formula that estimated $500,000 of total
manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were
recorded this year:
a. Raw materials were purchased on account, $614,000.
b. Raw materials used in production, $567,600. All of of the raw materials were used as direct materials.
c. The following costs were accrued for employee services: direct labor, $450,000; indirect labor, $150,000; selling and
administrative salaries, $290,000.
d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods
warehousing), $375,000.
e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $350,000.
f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all
jobs during the year.
g. Jobs costing $1,461,900 to manufacture according to their job cost sheets were completed during the year.
h. Jobs were sold on account to customers during the year for a total of $3,172,500. The jobs cost $1,471,900 to
manufacture according to their job cost sheets.
Foundational 3-15 (Algo)
15. What is the net operating income for this year?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9737efd-391f-457a-98f6-aa044a0527f1%2F935156c2-43b4-4bf1-a258-b8e1f059e7d9%2Ftpsa2j_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The following an applies to the questions displayed below.j
Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were
as follows:
Raw materials
Work in process
Finished goods
$ 84,500
$ 35,000
$ 44,100
The company applies overhead cost to jobs using direct labor-hours. For this year, the company's predetermined
overhead rate of $12.50 per direct labor-hour was based on a cost formula that estimated $500,000 of total
manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were
recorded this year:
a. Raw materials were purchased on account, $614,000.
b. Raw materials used in production, $567,600. All of of the raw materials were used as direct materials.
c. The following costs were accrued for employee services: direct labor, $450,000; indirect labor, $150,000; selling and
administrative salaries, $290,000.
d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods
warehousing), $375,000.
e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $350,000.
f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all
jobs during the year.
g. Jobs costing $1,461,900 to manufacture according to their job cost sheets were completed during the year.
h. Jobs were sold on account to customers during the year for a total of $3,172,500. The jobs cost $1,471,900 to
manufacture according to their job cost sheets.
Foundational 3-15 (Algo)
15. What is the net operating income for this year?
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