Answer:
To calculate the total cash disbursement for manufacturing overhead, take the total manufacturing overhead cost less depreciation.
Total manufacturing overhead cost
= Variable costs + Fixed costs
= (direct labor hours x rate per direct labor hour) + Fixed costs
= (3000 x $5) + $43140
= $15000 + $43140
= $58140
Cash disbursement cost
= Total manufacturing overhead cost - depreciation
= $58140 - $3620
= $54520
The January cash disbursement for manufacturing overhead is $54520.
Explanation:
A few key points to remember:
Fixed manufacturing overhead cost is all the costs of production which stay constant such rent, depreciation, etc. In other words components in the manufacturing process which stay constant.
Variable cost is based on the number of direct labor hours and the rate allocated per direct labor hour.
When calculating the cash disbursement, depreciation is taken out as a fixed component from the total manufacturing cost as it is not a cash outlay even though it is a fixed cost. Hence cash disbursement is calculated on the total manufacturing overhead less depreciation.
