Question

TB Problem Qu. 8-231 Brockney Inc. bases its manufacturing ... Brockney Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $92,130 per month, which includes depreciation of $19,820. All other fixed manufacturing overhead costs represent current cash flows. The July direct labor budget indicates that 8,300 direct labor-hours will be required in that month. Required: 1. Determine the cash disbursements for manufacturing overhead for July. 2. Determine the predetermined overhead rate for July. (Round your answer to 2 decimal places.)

Answer 1

Answer:

1. Cash Disbursements for manufacturing overhead = Variable + Fixed - Depreciation

Variable = $1.40 X 8,300  = $11,620

Fixed = $92,130

Depreciation = $19,820

Cash Disbursement = $11,620 + $92,130 - $19,820 = $83,930

2. Predetermined Overhead Rate for July will be inclusive of depreciation as that is part of factory cost and will form part of product cost.

Total factory cost = $11,620 + $92,130 = $103,750

Total hours = 8,300

Overhead Rate = $103,750/8,300 = $12.5