The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with $16,000 of this amount being factory depreciation.
-If the budgeted cash disbursements for factory overhead for September are $80,000, then the budgeted production for September must be:

Question

Quizplus · Accepted Answer

The budgeted cash disbursements for factory overhead exclude non-cash items like depreciation. Therefore, cash disbursements are $75,000 - $16,000 = $59,000 for fixed overhead. The remaining $21,000 ($80,000 - $59,000) is for variable overhead, which is $3.00 per unit. Thus, $21,000 / $3.00 = 7,000 units.

The Culver Company Is Preparing Its Manufacturing Overhead Budget for the Third