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	10,200	9,300	9,600	10,400

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.75 per direct labor-hour and its total fixed manufacturing overhead is $70,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $17,500 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. Prepare the company’s manufacturing overhead budget for the upcoming fiscal year.

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Budgeted direct labour hour	10200	9300	9600	10400	39500
variable overhead rate	4.75	4.75	4.75	4.75	4.75
Variable manufacturing overhead	48450	44175	45600	49400	187625
Fixed manufacturing overhead	70000	70000	70000	70000	280000
Total manufacturing overhead	118450	114175	115600	119400	467625
Less: Depreciation	-17500	-17500	-17500	-17500	-70000
Cash disbursement on manufacturing overhead	100950	96675	98100	101900	397625

2) Predetermine overhead rate = 467625/39500 = $11.84 per labour hour