$1.$ How was the overhead rate of $185\%$ of production run labor cost determined $($formula only; no need of calculation$)?$ What is the actual overhead rate for the current month? Is this difference the reason why gross margin of pumps fell from budgeted $35\%$ to $5\%?$

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POHR $=($Total Manufacturing Overhead$)/($Total Direct Labor Cost$)$

POHR $=654,600/351,000[$GG$1]$

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Applied OH $=1\mathrm{.}85$ x $351,000=$ $$649,350$

Actual OH $=$ $$654,600$

Overapplied by $$5250.$ No$,$ the difference of $$5250$ should not decrease the gross margins of the pumps. $$