Question

The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,700 direct labor-hours will be required in January. The variable overhead rate is $7 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $42,990 per month, which includes depreciation of $3,770. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: Multiple Choice 0 $61,890 0 $18,900 0 $58,120 0 $39,220

Answer 1

Solution 1:

Cash disbursement for manufacturing overhead for January = Variable overhead + Fixed overhead - Depreciation

= (2700*$7) + $42,990 - $3,770 = $58,120

Hence 3rd option is correct.

Solution 2:

Cash disbursement for manufacturing overhead for August = Variable overhead + Fixed overhead - Depreciation

= (8700*$1.60) + $100,500 - $8,850 = $105,570

Hence 2nd option is correct.