Question

The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,000 direct labor-hours will be required in January. The variable overhead rate is $8 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,240 per month, which includes depreciation of $3,520. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Multiple Choice

• $75,240

• $32,000

• $71,720

• $39,720

Answer 1

C. $71,720

Cash disbursements for January = (Variable overhead rate × Number of direct-labor hours) + (Fixed manufacturing overhead less depreciation)

= (4,000 × $8) + ($43,240 − $3,520)

= $71,720