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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.
(b) Assuming that the entire amount of the underapplied or overapplied overhead is closed out to Cost of Goods Sold, what would be the effect of the underapplied or overapplied overhead on the company's gross margin for the period?

Respuesta :

The correct statement is that the under applied overheads for Osborn Manufacturing Company is calculates as a negative balance of $5700 at the overhead rate of $18.20.

The calculation of the overhead costs is done by using the formula for under applied overheads and calculating the required values from such given information.

Calculation of manufacturing overheads:

The formula for the calculation of manufacturing overheads whether under applied or over applied can be determined is as below,

Under - applied Overheads = Applied Overhead - Actual overhead

However, to calculate further the actual overheads can be calculated as below by applying the given values to the formula,

Applied Overheads = Actual Level of Direct labour hours x overhead rate per unit labour hour

Applied Overheads = 11500 x 18.20

Applied Overheads = $209300

Now applying the values to the formula, we get,

Under - applied Overheads=209300 - 21500

Under - applied Overheads = -$5700

So, the under-applied manufacturing overheads are calculated as -$5,700.

Hence, the correct statement is that under applied overheads for Osborn Manufacturing Company is calculated as a negative balance of $5700 at the overhead rate of $18.20.

Learn more about manufacturing overheads here: https://brainly.com/question/13214087?

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