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    Exercise 3-8 MA

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    sesegar_nailofar
    Osborn Manufacturing estimated overhead costs of $218,400 based on 12,000 labor hours but actual costs were $215,000 for 11,500 hours. The predetermined overhead rate was $18.20 per hour. Actual overhead applied was $209,300, so there was $5,700 of underapplied overhead. If this full amount was closed to cost of goods sold, it would decrease gross margin for the period.

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    Exercise 3-8 MA

    Uploaded by

    sesegar_nailofar
    2K views1 page
    Osborn Manufacturing estimated overhead costs of $218,400 based on 12,000 labor hours but actual costs were $215,000 for 11,500 hours. The predetermined overhead rate was $18.20 per hour. Actual overhead applied was $209,300, so there was $5,700 of underapplied overhead. If this full amount was closed to cost of goods sold, it would decrease gross margin for the period.

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    exercise 3-8 MA

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    Osborn Manufacturing estimated overhead costs of $218,400 based on 12,000 labor hours but actual costs were $215,000 for 11,500 hours. The predetermined overhead rate was $18.20 per hour. Actual overhead applied was $209,300, so there was $5,700 of underapplied overhead. If this full amount was closed to cost of goods sold, it would decrease gross margin for the period.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    2K views1 page

    Exercise 3-8 MA

    Uploaded by

    sesegar_nailofar
    Osborn Manufacturing estimated overhead costs of $218,400 based on 12,000 labor hours but actual costs were $215,000 for 11,500 hours. The predetermined overhead rate was $18.20 per hour. Actual overhead applied was $209,300, so there was $5,700 of underapplied overhead. If this full amount was closed to cost of goods sold, it would decrease gross margin for the period.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Exercise 3-8 : Under-and overapplied overhead

    Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This
    predetermined rate was based on 12,000 estimated direct labor-hours and $218,400 of estimated
    total manufacturing overhead.
    The company incurred actual total manufacturing overhead costs of $215,000 and 11,500 total
    direct labor-hours during the period.
    Required :
    1. Determined that amount of underapplied or overapplied manufacturing overhead for the
    period.
    2. Assuming that the entire amount of underapplied or overapplied overhead is closed out to
    Costs of Goods Sold, what would be the effect of the underapplied or overapplied
    overhead on the company’s gross margin for the period?

    Answer :

    1. Predetermined overhead rate = Estimated total manufacturing overhead cost


    Estimated total amount of the allocation base
    =$218,400
    12,000

    =18.2/direct labor-hours

    Overhead applied = predetermined overhead rate X Actual direct labor-hours charged to


    job

    = 11,500 X $18.20
    = $209.300
    Underapplied/overapplied manufacturing overhead = $215,000-209,300
    =$5,700

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