Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-ho

Question

Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,700 direct labor-hours will be required in January. The variable overhead rate is $1.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,430 per month, which includes depreciation of $8,920. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be

$110,440

$101,520

$91,510

$10,010

Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,700 direct labor-hours will be required in January. The variable overhead rate is $1.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,430 per month, which includes depreciation of $8,920. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be

$110,440

$101,520

$91,510

$10,010

Explanation / Answer

Cash disbursements for manufacturing ovehead = Total varaibel overhead + Total fixed overhead - Depreciation

= (7,700 hours * $1.30 per hour) + $100,430 - $8,920

= $10,010 + $91,510

= $101,520

Therefore, second option is correct.

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