The direct labor budget indicates that 1,600 direct labor-hours will be required in December. The variable overhead rate is calculated at $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $25,120 per month, which includes depreciation of $5,440. All variable and fixed manufacturing overhead costs are paid in the month incurred. The budgeted December cash payments for total manufacturing overhead is:

Question

Guest

Business

24 October, 00:02

The direct labor budget indicates that 1,600 direct labor-hours will be required in December. The variable overhead rate is calculated at $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $25,120 per month, which includes depreciation of $5,440. All variable and fixed manufacturing overhead costs are paid in the month incurred. The budgeted December cash payments for total manufacturing overhead is:

+2

Answers (1)

Know the Answer?

Carroll · Answer 1

Cash disbursement december = $6,586.67

Explanation:

Giving the following information:

Estimated direct labor hours = 1,600 hours

Predetermined overhead rate = $4.40 per direct labor-hour.

The company's budgeted fixed manufacturing overhead is $25,120 per month, which includes depreciation of $5,440.

First, we need to calculate the allocated overhead for the period:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 4.4*1,600 = $7,040

The depreciation expense is not a cash disbursement. We need to prorate the depreciation expense for December.

Monthly depreciation expense = 5,440/12 = 453.33

Cash disbursement december = 7,040 - 453.33 = $6,586.67