Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hour

Question

Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 9,200 direct labor-hours will be required in May. The variable overhead rate is $4.20 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $126,600 per month, which includes depreciation of $8,250. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Explanation / Answer

May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be =  budgeted fixed manufacturing overhead +  budgeted variable manufacturing overhead

= $ 126,600 + ( $4.20 per direct labor-hour * 9,200 direct labor-hours)

= $ 165,240

Hence the correct answer is $ 165,240

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