Exercise 3-4 (Algo) Underapplied and Overapplied Overhead [LO3-4) Osbor Manufacturing uses a predetermined overhead rate of $18.50 per direct labor hour. This predetermined rate was based on a cost formula that estimates $227,550 of total manufacturing overhead for an estimated activity level of 12,300 direct labor. hours. The company actually incurred $221,000 of manufacturing overhead and 11.800 direct labor hours during the period. Required: 1. Determine the amount of underapplied or overapplied manufacturing overhead for the period. 2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company's gross margin? By how much? 1 Manufacturing overhead 2 The gross margin would by by ces