The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,500 direct labor-hours will be required in January. The variable overhead rate is $5 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,010 per month, which includes depreciation of $3,750. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Question

Quizplus · Accepted Answer

Variable overhead cost = Variable overhead rate × Direct labor-hours 
= $5 × 2,500 = $12,500

Fixed overhead cost = Budgeted fixed manufacturing overhead - Depreciation
= $43,010 - $3,750 = $39,260

Total manufacturing overhead cost = Variable overhead cost + Fixed overhead cost 
= $12,500 + $39,260 = $51,760

Therefore, the January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be $51,760.

The Manufacturing Overhead Budget at Franklyn Corporation Is Based on Budgeted