Asked by Emilio Paderanga on Jul 28, 2024
Verified
Avril Incorporated 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) $68,800
B) $64,960
C) $14,720
D) $50,240
Cash Disbursements
A financial record of money being paid out or disbursed by a company, usually part of the cash outflow in its cash flow statement.
Manufacturing Overhead Budget
An estimate of all manufacturing costs excluding direct materials and direct labor, planned for a specific period.
Direct Labor-Hour
A measure of the amount of time spent by direct labor workers on a specific job or task, often used to allocate labor costs in job-order costing.
- Estimate the budgeted payments for manufacturing overhead costs using the correlation between direct labor-hours and applied overhead rates.
Verified Answer
Depreciation = $3,840 per month
Total Fixed Manufacturing Overhead excluding depreciation = $54,080 - $3,840 = $50,240 per month
Therefore, the total manufacturing overhead budget for October is calculated as follows:
Total Manufacturing Overhead = Variable Manufacturing Overhead + Fixed Manufacturing Overhead
Total Manufacturing Overhead = ($4.60 per DLH x 3,200 DLH) + $50,240
Total Manufacturing Overhead = $14,720 + $50,240
Total Manufacturing Overhead = $64,960
Hence, the cash disbursement for manufacturing overhead in October will be $64,960, which is option B.
Learning Objectives
- Estimate the budgeted payments for manufacturing overhead costs using the correlation between direct labor-hours and applied overhead rates.
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