Cartier Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $5.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $39,930 per month, which includes depreciation of $12,870. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 3,300 direct labor-hours will be required in April.
-The April cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Question

Quizplus · Accepted Answer

The cash disbursements for manufacturing overhead include variable overhead and the cash portion of fixed overhead. Variable overhead is $5.80 per direct labor-hour, so for 3,300 hours, it is 3,300 * $5.80 = $19,140. The cash portion of fixed overhead is $39,930 - $12,870 (depreciation) = $27,060. Total cash disbursements = $19,140 + $27,060 = $46,200.