Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predeterminedrate was based on 12,000 estimated direct labor-hours and $218,400 of estimated total m anufacturing overhead.The company incurred actual total manufacturing overhead costs of $215,000 and 11,500 total directlabor-hours during the period.Required:1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.2. Assuming that the entire amount of the underapplied or overapplied overhead is closed out to Cost ofGoods Sold, what would be the effect of the underapplied or overapplied overhead on the company’sgross margin for the period?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Osborn Manufacturing uses a predetermined
rate was based on 12,000 estimated direct labor-hours and $218,400 of estimated total m anufacturing overhead.
The company incurred actual total
labor-hours during the period.
Required:
1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.
2. 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?
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