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

Question

Gokey Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $5.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $78,840 per month, which includes depreciation of $20,520. All other fixed manufacturing overhead costs represent current cash flows. The November direct labor budget indicates that 5,400 direct labor-hours will be required in that month.

Required:

a. Determine the cash disbursement for manufacturing overhead for November.

b. Determine the predetermined overhead rate for November. Gokey Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $5.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $78,840 per month, which includes depreciation of $20,520. All other fixed manufacturing overhead costs represent current cash flows. The November direct labor budget indicates that 5,400 direct labor-hours will be required in that month.

Required:

a. Determine the cash disbursement for manufacturing overhead for November.

b. Determine the predetermined overhead rate for November.

Explanation / Answer

overhead rate = 5.1 per direct labor hour

fixed over head = 78840

depreciation = 20520

no of labor hour =5400

total variable cost = 5400*5.1 = 27540

total cash outflow = 27540+78840-20520 = $85860

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