Mouw Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 5,400 direct labor-hours will be required in January. The variable overhead rate is $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $77,220 per month, which includes depreciation of $9,720. 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

The cash disbursements for manufacturing overhead include variable overhead and cash-based fixed overhead. Variable overhead is 5,400 hours * $4.40 = $23,760. Fixed overhead cash flows are $77,220 - $9,720 = $67,500. Total cash disbursements = $23,760 + $67,500 = $91,260.

Mouw Inc Bases Its Manufacturing Overhead Budget on Budgeted Direct Labor-Hours