The direct labour budget of Small Corporation for the upcoming fiscal year conta

Question

The direct labour budget of Small Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labour-hours:

The company’s variable manufacturing overhead rate is $2.20 per direct labour-hour, and the company’s fixed manufacturing overhead is $36,000 per quarter. The only non-cash item included in the fixed manufacturing overhead is depreciation, which is $17,000 per quarter.

A)

Prepare the company’s manufacturing overhead budget for the upcoming fiscal year.

Small Corporation

Manufacturing Budget Overhead

B) Compute the company’s manufacturing overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.

First Quarter Second Quarter Third Quarter Fourth Quarter Budgeted direct labour-hours 5,900 5,700 6,100 6,300

Explanation / Answer

Ans. A Small Corporation Manufacturing Budget Overhead First Quarter Secong Quarter Third Quarter Fourth Quarter Year (Total) Variable manufacturing overhead 12980 12540 13420 13860 52800 Fixed manufacturing overhead 36000 36000 36000 36000 144000 Total manufacturing overhead 48980 48540 49420 49860 196800 Less: Depreciation 17000 17000 17000 17000 68000 Cash disbursements for manufacturing overhead 31980 31540 32420 32860 128800 Ans. B Total budgeted manufacturing overhead for the year 196800 Budgeted direct labor hours 24000 Predetermined overhead rate for the year 8.2 *Calculation of Variable manufacturing overhead: Variable manufacturing overhead = Budgeted direct labor-hours * Variable manufacturing overhead rate *Predetermined overhead rate = Total budgeted manufacturing overhead / Budgeted direct labor hours *Budgeted direct labor hours (5900 + 5700 +6100 +6300)    =   24000

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