Question

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

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Budgeted direct labor-hours	12,000	10,200	10,500	11,300

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $7.00 per direct labor-hour and its total fixed manufacturing overhead is $88,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $22,000 per quarter.

Required:

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

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

Answer 1

1.

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Budgeted direct labor hours	12000	10200	10500	11300	44000
Variable manufacturing overhead rate	7	7	7	7	7
Variable manufacturing overhead	84000	71400	73500	79100	308000
Fixed manufacturing overhead	88000	88000	88000	88000	352000
Total manufacturing overhead	172000	159400	161500	167100	660000
Less: Depreciation	-22000	-22000	-22000	-22000	-88000
Cash disbursement on manufacturing overhead	$150000	$137400	$139500	$145100	$572000

2.

Total budgeted manufacturing overhead for the year	660000
Budgeted direct labor hours for the year	44000
Predetermined overhead rate per hour for the year	$15 per hour