Question

Edgington Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $1.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $91,020 per month, which includes depreciation of $19,810. All other fixed manufacturing overhead costs represent current cash flows. The November direct labor budget indicates that 8,200 direct labor-hours will be required in that month.

Required:

a.	Determine the cash disbursement for manufacturing overhead for November. b. Determine the predetermined overhead rate for November. (Round your answer to 2 decimal places.)

Answer 1

a) Determine the cash disbursement for manufacturing overhead for November.

	November
Budgeted labour hour	8200
Variable manufacturing overhead rate per unit	1.30
Variable manufacturing overhead	10660
Fixed manufacturing overhead	91020
Total manufacturing overhead	101680
Less: Depreciation	(19810)
Cash disbursement for manufacturing overhead	81870

b) Determine the predetermined overhead rate for November.

Predetermine overhead rate = 101680/8200 = 12.40 per labour hour