Question

EXERCISE 8–5 Manufacturing Overhead Budget LO8–6
The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the follow- ing details concerning budgeted direct labor-hours:

	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Budgeted direct labor-hours . . . . . . . .	8,000		8,200		8,500		7,800

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $3.25 per direct labor-hour and its total fixed manu- facturing overhead is $48,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,000 per quarter.

Required:

1. Using Schedule 5 as your guide, 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 man- ufacturing overhead) for the upcoming fiscal year. Round off to the nearest whole cent.

Answer 1

Solution 1:

Manufacturing overhead budget - Yuvwell Corporation
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Budgeted Variable manufacturing overhead (Budgeted hours * variable overhead rate)	$26,000.00	$26,650.00	$27,625.00	$25,350.00	$105,625.00
Fixed manufacturing overhead	$48,000.00	$48,000.00	$48,000.00	$48,000.00	$192,000.00
Budgeted manufacturing overhead	$74,000.00	$74,650.00	$75,625.00	$73,350.00	$297,625.00

Solution 2:

Predetermined overhead rate = Budgeted overhead / Budgeted direct labor hours

= $297,625 / 32500 = $9.16 per direct labor hour