Asked by Shalini Ballur on May 06, 2024
Verified
The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 1,600 direct labor-hours will be required in February. The variable overhead rate is $3.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $28,320 per month, which includes depreciation of $3,680. All other fixed manufacturing overhead costs represent current cash flows.The February cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
A) $24,640
B) $33,760
C) $30,080
D) $5,440
Manufacturing Overhead Budget
A detailed plan that estimates all expected indirect production costs except for direct labor and direct materials.
Fixed Manufacturing Overhead
The set of manufacturing costs that do not vary with the level of production, such as salaries of factory supervisors and rent of the manufacturing facility.
- Prepare and analyze a manufacturing overhead budget, understanding both variable and fixed components.
- Compute budgeted cash disbursements for manufacturing overhead based on direct labor-hours and overhead rates.
Verified Answer
Fixed manufacturing overhead for February = $28,320 (including depreciation)
Total manufacturing overhead for February = Variable manufacturing overhead + Fixed manufacturing overhead = $5,440 + $28,320 = $33,760
However, the question is asking for cash disbursements, not total manufacturing overhead. Since depreciation is a non-cash expense, we need to subtract it from the fixed manufacturing overhead budget to find the cash disbursement for February:
Cash disbursement for February = Variable manufacturing overhead + (Fixed manufacturing overhead - Depreciation) = $5,440 + ($28,320 - $3,680) = $30,080
Therefore, the correct answer is C.
Learning Objectives
- Prepare and analyze a manufacturing overhead budget, understanding both variable and fixed components.
- Compute budgeted cash disbursements for manufacturing overhead based on direct labor-hours and overhead rates.
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