Fossil Manufacturing Uses a Predetermined Overhead Rate of $17

question 307

Essay

Fossil Manufacturing uses a predetermined overhead rate of $17.80 per direct labor-hour. This predetermined rate was based on 11,000 estimated direct-labor-hours and $195,800 of estimated total manufacturing overhead. The company incurred actual manufacturing overhead costs of $194,000 and 10,500 direct labor-hours.
Required:
a. Determine the amount of underapplied or overapplied manufacturing overhead for the period.
b. Assuming that the company closed manufacturing overhead to cost of goods sold, make the journal entry to close manufacturing overhead.
c. What is the effect of this entry on the company's gross margin?

Grasp the concept of net income, net loss, and how they are determined.

Understand the role of transactions in affecting a company's financial status.

Differentiate between various types of payments and financial activities within a business.

Understand the components that make up a balance sheet or statement of financial position.

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Definitions:

Voidable

A legal term referring to a contract or transaction that may be deemed invalid by one party, though it remains valid until annulled.

Fraudulent

Deceptive or dishonest behavior intended to result in financial or personal gain.

Innocent Misrepresentation

A false statement made by someone who believes it to be true, without intent to deceive.

Intentional Fraud

Deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.