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?

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Definitions:

Drive-Reduction Theory

A theory in psychology that explains motivation as being rooted in the desire to reduce internal tensions caused by unmet biological needs.

Cognitive Developmental Theory

A psychological theory that suggests how children acquire knowledge and understanding of the world around them, often associated with Jean Piaget.

Tension Motivates

The concept that a certain level of stress or tension can drive individuals to perform better or reach their goals.

Resting State

A condition or state in which the body is not actively engaged in any physical activity, allowing for recovery and conservation of energy.