A. Parmitan Corporation has provided the following data concerning last month’s manufacturing operations.
Purchases of raw materials $ 32,000
Indirect materials included in manufacturing overhead $ 4,810
Direct labor $ 58,100
Manufacturing overhead applied to work in process $ 88,000
Underapplied overhead $ 4,060
Raw materials $ 11,600 $ 18,900
Work in process $ 55,500 $ 68,700
Finished goods $ 33,500 $ 42,400
1. Prepare a schedule of cost of goods manufactured for the month. (Input all amounts as positive values.)
2. Prepare a schedule of cost of goods sold for the month. (Input all amounts as positive values.)
B. Cretin Enterprises uses a predetermined overhead rate of $22.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $179,376 of total manufacturing overhead for an estimated activity level of 8,000 direct labor-hours.
The company incurred actual total manufacturing overhead costs of $181,000 and 8,240 total direct labor-hours during the period.
1. Determine the 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 cost of goods sold, what would be the effect of the underapplied or overapplied overhead on the company’s gross margin for the period?