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 8,200 8,300 8,600 8,000 The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $2.25 per direct labor-hour and its total fixed manufacturing overhead is $50,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $12,500 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

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

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Direct labour hours	8200	8300	8600	8000	33100
Variable overhead rate per hour	2.25	2.25	2.25	2.25	2.25
Variable overhead cost	18450	18675	19350	18000	74475
Fixed overhead cost	50000	50000	50000	50000	200000
Total manufacturing overhead	68450	68675	69350	68000	274475
Less: Depreciation	-12500	-12500	-12500	-12500	-50000
Cash disbursement on manufacturing overhead	55950	56175	56850	55500	224475

b) Predetermine overhead rate = 274475/33100 = 8.29 per labour hour