The manufacturing overhead budget at Ferrucci Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 1,600 direct labor-hours will be required in December. The variable overhead rate is $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $25,120 per month, which includes depreciation of $5,440. All other fixed manufacturing overhead costs represent current cash flows. The December cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Question

Quizplus · Accepted Answer

First, we need to calculate the total budgeted manufacturing overhead:

Total budgeted manufacturing overhead = Variable overhead + Fixed overhead
Total budgeted manufacturing overhead = (Direct labor hours x Variable overhead rate) + Fixed overhead
Total budgeted manufacturing overhead = (1,600 x $4.40) + $25,120
Total budgeted manufacturing overhead = $7,040 + $25,120
Total budgeted manufacturing overhead = $32,160

Next, we need to determine the cash disbursements for December. Since the budgeted fixed manufacturing overhead includes depreciation, we need to subtract the depreciation expense to get the cash disbursements:

Cash disbursements = Variable overhead + Fixed overhead - Depreciation
Cash disbursements = (Direct labor hours x Variable overhead rate) + Fixed overhead - Depreciation
Cash disbursements = (1,600 x $4.40) + $25,120 - $5,440
Cash disbursements = $7,040 + $19,680
Cash disbursements = $26,720

Therefore, the correct answer is C) $26,720.

The Manufacturing Overhead Budget at Ferrucci Corporation Is Based on Budgeted