The Charade Company is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable factory overhead is $5.00 per direct labor-hour; the budgeted fixed factory overhead is $75,000 per month, of which $15,000 is factory depreciation.
-If the budgeted cash disbursements for factory overhead for December total $105,000, then the budgeted direct labor-hours for December must be:

Question

Quizplus · Accepted Answer

To calculate the budgeted direct labor-hours for December, we need to first calculate the total factory overhead cost for the month:
Budgeted Fixed Factory Overhead = $75,000 – $15,000 (for factory depreciation) = $60,000
Total Budgeted Factory Overhead = Budgeted Variable Factory Overhead + Budgeted Fixed Factory Overhead = $5.00 per direct labor-hour + $60,000
$105,000 = $5.00x + $60,000
$45,000 = $5.00x
x = 9,000 
Therefore, the budgeted direct labor-hours for December must be 9,000 hours.

The Charade Company Is Preparing Its Manufacturing Overhead Budget for the Fourth