The manufacturing overhead budget at Mahapatra Corporation is based on budgeted

Question

The manufacturing overhead budget at Mahapatra Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 9,400 direct labor-hours will be required in May. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $127,840 per month, which includes depreciation of $18,290. All other fixed manufacturing overhead costs represent current cash flows.

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

$109,550

$208,680

$80,840

$190,390

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Total Cash Disbursements = Variable Overheads + Fixed Overheads = 9400*8.6 + (127840 - 18290) = 190390

Option D (190390) is the correct answer.

Notes:

Depreciation is a non-cash expense and its value would therefore be excluded from the total value of fixed cost.

Thanks.

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