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26 May, 07:35

Davis Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $1.70 per direct labor-hour; the budgeted fixed manufacturing overhead is $116,000 per month, of which $30,000 is factory depreciation. If the budgeted direct labor time for November is 7,000 hours, then the total budgeted cash disbursements for manufacturing overhead for November must be:

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  1. 26 May, 07:55
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    The total budgeted cash disbursements for manufacturing overhead for November must be $97,900

    Explanation:

    The steps to compute the total budgeted cash disbursements is shown below:

    Step 1 : Calculation of fixed manufacturing overhead without considering depreciation

    = Fixed manufacturing overhead - Depreciation

    = $116,000 - $30,000

    = $86,000

    Step 2 : Now calculate the budgeted variable manufacturing cost

    = Budgeted direct labor hours * overhead rate

    = 7,000 * $1.70

    = $11,900

    Step 3 : Add Step 1 and Step 2

    So, $86000 + $11,900 = $97,900

    Hence, the total budgeted cash disbursements for manufacturing overhead for November must be $97,900
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