Question

The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 9,600 Budgeted direct labor- hours 9,000 9,300 10,100 The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.00 per direct labor-hour and its total fixed manufacturing overhead is $64,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,000 per quarter Required: 1. Prepare the company's manufacturing overhead budget for the upcoming fiscal year. 2. Compute the company's predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year

Answer 1

Manufacturing overhead

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Direct labor hour	9600	9000	9300	10100	38000
Variable manufacturing overhead per hour	4	4	4	4	4
Total variable manufacturing overhead	38400	36000	37200	40400	152000
Fixed manufacturing overhead	64000	64000	64000	64000	256000
Total manufacturing overhead	102400	100000	101200	104400	408000
Less: Depreciation	-16000	-16000	-16000	-16000	-64000
Cash disbursement on manufacturing overhead	86400	84000	85200	88400	344000

2) Predetermine overhead rate = 408000/38000 = 10.74 per hour