Question

The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $6 per direct labor-hour; the budgeted fixed manufacturing overhead is $86,000 per month, of which $16,100 is factory depreciation.

If the budgeted direct labor time for November is 8100 hours, then the total budgeted manufacturing overhead for November is:

$134,600

$150,700

$118,500

$86,000

Answer 1

Charade Corporation

Budgeted manufacturing overhead = Variable manufacturing overhead + Fixed manufacturing overhead

Where,

Variable manufacturing overhead = $ 6 per direct labor hour

Variable manufacturing overhead = 8,100 hours × $ 6 = $ 48,600

Fixed manufacturing overhead = $ 86,000

(Note : factory depreciation is form part of manufacturing overhead because it belongs to factory equipment, any repairs, maintenance, depreciation and any other expenses of factory will be considered as manufacturing overhead)

Budgeted manufacturing overhead = $ 48,600 + $ 86,000 = $ 134,600

Hence "1st option" is correct. Budgeted manufacturing overhead for November is $ 134,600