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  3) Hahn Company uses a job-order costing system

Management

 

3) Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $15 per hour. During the year, the company started and completed only two jobs—Job Alpha, which used 54,500 direct labor-hours, and Job Omega. The job cost sheets for the these two jobs are shown below:

 

Job Alpha  

Direct materials      ?

Direct labor    ?

Manufacturing overhead applied     ?

Total job cost     $1,533,500

 

 

Job Omega  

Direct materials         $235,000

Direct labor          345,000

Manufacturing overhead applied 184,000

Total job cost         $764,000

 

 

Required:

1. Calculate the plantwide predetermined overhead rate.

2. Complete the remaining "?" on the Job Alpha sheet.

 

4) Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218,400 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours.

 

The company actually incurred $215,000 of manufacturing overhead and 11,500 direct labor-hours during the period.

 

Answer:

1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.

 

2. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company's gross margin? By how much? Fill the blanks below:

 

I. Manufacturing overhead ( -increase/decrease- ) by ____________

II. The gross margin would (-increase/decrease )by ___________

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