Avril Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $4.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $54,080 per month, which includes depreciation of $3,840. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 3,200 direct labor-hours will be required in October. The October cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A. $50,240

B. $64,960

C. $14,720

D. $68,800

Question

Solomon Avila

Business

7 February, 00:22

Avril Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $4.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $54,080 per month, which includes depreciation of $3,840. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 3,200 direct labor-hours will be required in October. The October cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A. $50,240

B. $64,960

C. $14,720

D. $68,800

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Answers (1)

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Buds · Answer 1

B. $64,960

Explanation:

The computation of the cash disbursements for manufacturing overhead on the manufacturing overhead budget is shown below:

= Direct labor hours * variable overhead rate per direct labor-hour + budgeted fixed manufacturing overhead - depreciation expense

= 3,200 direct labor hours * $4.60 + $54,080 - $3,840

= $14,720 + $50,240

= $64,960

Direct labor hours * variable overhead rate per direct labor-hour is also known as variable manufacturing overhead