Question

question 9
the manufacturing overhead budget of paparella corporation is based on budgeted direct labor - hours. the november direct labor budget indicates that 6,000 direct labor - hours will be required in that month. the variable overhead rate is $2.00 per direct labor - hour. the companys budgeted fixed manufacturing overhead is $79,200 per month, which includes depreciation of $21,000. all other fixed manufacturing overhead costs represent current cash flows.
required:
a. determine the cash disbursements for manufacturing overhead for november.
b. determine the predetermined overhead rate for november.

Explanation:

Part A: Cash Disbursements for Manufacturing Overhead

Step 1: Calculate Variable Overhead Cash Flow

Variable overhead rate is $2 per direct labor - hour, and direct labor - hours are 6,000. So variable overhead cash flow = variable overhead rate×direct labor - hours.
$2\times6000 = 12000$

Step 2: Calculate Fixed Overhead Cash Flow

Budgeted fixed manufacturing overhead is $79,200, and depreciation (a non - cash expense) is $21,000. So fixed overhead cash flow = budgeted fixed manufacturing overhead - depreciation.
$79200 - 21000=58200$

Step 3: Calculate Total Cash Disbursements

Total cash disbursements for manufacturing overhead = variable overhead cash flow+fixed overhead cash flow.
$12000 + 58200 = 70200$

Step 1: Calculate Total Budgeted Manufacturing Overhead

Total budgeted manufacturing overhead = budgeted variable manufacturing overhead+budgeted fixed manufacturing overhead.
Budgeted variable manufacturing overhead = variable overhead rate×direct labor - hours=$2\times6000 = 12000$.
Budgeted fixed manufacturing overhead is $79,200.
So total budgeted manufacturing overhead=$12000 + 79200=91200$.

Step 2: Calculate Predetermined Overhead Rate

Predetermined overhead rate = total budgeted manufacturing overhead÷budgeted direct labor - hours.
$91200\div6000 = 15.2$

Answer:

The cash disbursements for manufacturing overhead for November is $\$70,200$.

Part B: Predetermined Overhead Rate