Osborn Manufacturing uses a predetermined overhead rate of $18.40 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $224,480 of total manufacturing overhead for an estimated activity level of 12,200 direct labor-hours.

The company actually incurred $219,000 of manufacturing overhead and 11,700 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 companys gross margin? By how much?

1.	Manufacturing overhead	underapplied	by
2.	The gross margin would		by

Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firms direct labor includes salaries of consultants that work at the clients job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients.

Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 85,000 direct labor-hours would be required for the periods estimated level of client service. The company also estimated $935,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firms actual overhead cost for the year was $952,900 and its actual total direct labor was 89,050 hours.

Required:

1. Compute the predetermined overhead rate.

2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job:

Direct materials	$	44,100
Direct labor cost	$	30,800
Direct labor hours worked		340

Compute the total job cost for the Xavier Company engagement.

redetermined overhead rateper DLH

Direct materials ( )

Direct labor( )

Overhead applied( )

Total manufacturing cost( )