Exercise 2-7 Underapplied and Overapplied Overhead [LO2-7]

Osborn Manufacturing uses a predetermined overhead rate of $19.30 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $252,830 of total manufacturing overhead for an estimated activity level of 13,100 direct labor-hours.

The company incurred actual total manufacturing overhead costs of $249,000 and 12,600 total direct labor-hours during the period.

Required:

1.

Determine the amount of underapplied or overapplied manufacturing overhead for the period.

what is manufacturing overhead ( ) by ( )

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 ( ) by ( )

Exercise 2-12 Applying Overhead; Cost of Goods Manufactured [LO2-2, LO2-6, LO2-7]

The following cost data relate to the manufacturing activities of Chang Company during the just completed year:

Manufacturing overhead costs incurred:
Indirect materials	$	16,200
Indirect labor		142,000
Property taxes, factory		9,200
Utilities, factory		82,000
Depreciation, factory		169,900
Insurance, factory		11,200
Total actual manufacturing overhead costs incurred	$	430,500
Other costs incurred:
Purchases of raw materials (both direct and indirect)	$	412,000
Direct labor cost	$	72,000
Inventories:
Raw materials, beginning	$	21,200
Raw materials, ending	$	31,200
Work in process, beginning	$	41,200
Work in process, ending	$	71,200

The company uses a predetermined overhead rate to apply overhead cost to jobs. The rate for the year was $21 per machine-hour. A total of 20,900 machine-hours was recorded for the year.

Required:

1.	Compute the amount of underapplied or overapplied overhead cost for the year. ( ) overhead cost ( ).