Exercise $3-4($Algo$)$ Underapplied and Overapplied Overhead $[$LO$3-4]$

Osborn Manufacturing uses a predetermined overhead rate of $$18\mathrm{.}90$ per direct labor$-$hour. This predetermined rate was based on a cost formula that estimates $$240,030$ of total manufacturing overhead for an estimated activity level of $12,700$ direct labor$-$hours. The company actually incurred $$237,000$ of manufacturing overhead and $12,200$ direct labor$-$hours during the period.

Required:

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?

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