Question

Exercise 8-5 Manufacturing Overhead Budget [LO8-6]

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
Budgeted direct labor-hours	10,000	9,200	9,500	10,300

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.50 per direct labor-hour and its total fixed manufacturing overhead is $68,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $17,000 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

Answer 2

Manufacturing overhead budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Budgeted direct labour hour	10000	9200	9500	10300	39000
Variable manufacturing overhead rate	4.50	4.50	4.50	4.50	4.50
Variable manufacturing overhead	45000	41400	42750	46350	175500
Fixed manufacturing overhead	68000	68000	68000	68000	272000
Total manufacturing overhead	113000	109400	110750	114350	447500
Less: Depreciation	-17000	-17000	-17000	-17000	-68000
Cash disbursement on manufacturing overhead	96000	92400	93750	97350	379500

Predetermine overhead rate = Estimated manufacturing overhead/Estimated labour hour = 447500/39000 = 11.47 per hour