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	9,600	9,000	9,300	10,100

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.00 per direct labor-hour and its total fixed manufacturing overhead is $64,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,000 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

Part 1
Manufacturing overhead budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Variable Manufacturing overheads	38400	36000	37200	40400	152000
	9600*4	9000*4	9300*4	10100*4
Fixed Manufacturing overheads	64000	64000	64000	64000	256000
Total Manufacturing overheads	102400	100000	101200	104400	408000
	38400+64000	36000+64000	37200+64000	40400+64000	152000+256000
Less: Depreciation	16000	16000	16000	16000	64000
Cash Disbursements for Manufacturing overheads	86400	84000	85200	88400	344000
	102400-16000	100000-16000	101200-16000	104400-16000	408000-64000

Part 2
Total Budgeted manufacturing overheads	408000
Budgeted direct labour hours (9600+9000+9300+10100)	38000
Predetrmined overhead rate (408000/38000)	10.73684211