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

Question

Salge Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $8.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $74,730 per month, which includes depreciation of $20,670. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 5,300 direct labor-hours will be required in September.

The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$42,930

$54,060

$96,990

$117,660

$42,930

$54,060

$96,990

$117,660

Explanation / Answer

September cash disbursements for manufacturing overhead = variable overhead rate * Direct labor budgeted + Total Fixed manufacturing Overhead - depreciation

September cash disbursements for manufacturing overhead = 8.10*5300 + 74730-20670

September cash disbursements for manufacturing overhead = $ 96,990

Answer

$ 96,990

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