The Menlo Company uses a predetermined overhead rate based direct-labor hours. At the beginning of the fiscal year, Menlo estimated 14,000 direct-labor hours were necessary to complete the production plan and estimated total manufacturing overhead at $252,000. Over the course of the year, the company incurred actual manufacturing overhead costs of $146,000 and 14,200 actual direct labor hours.

Required:

1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.
2. Assuming that the company closed manufacturing overhead to cost of goods sold, make the journal entry to close manufacturing overhead.
3. What is the effect of this entry on the companys gross profit?2