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:

Explanation / Answer

Cash Disbursements for the month of september

Direct labor cost = 5300*8.10 i.e 42930

Fixed cash manufacturing overhead = 74730-20670 i.e 54060

Total Cash disbursements for the month of september = 54060+42930 i.e 96990

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