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 9,800 9,100 9,400 10,200 The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.25 per direct labor-hour and its total fixed manufacturing overhead is $66,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,500 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

Yuvwell Corporation
Manufacturing Overhead Budget
	1st Quarter	2nd Quarter	3nd Quarter	4th Quarter	Year
Variable Manufacturing Overhead       [Refer working note]           (a)	$41,650	$38,675	$39,950	$43,350	$163,625
Fixed Manufacturing Overhead                                                        (b)	$66,000	$66,000	$66,000	$66,000	$264,000
Total Manufacturing Overhead                                                        (a + b)	$107,650	$104,675	$105,950	$109,350	$427,625
Less: Depreciation	$16,500	$16,500	$16,500	$16,500	$66,000
Cash disbursements for manufacturing Overhead	$91,150	$88,175	$89,450	$92,850	$361,625

.

.

2. Computation of manufacturing overhead rate
Total budgeted manufacturing overhead for the year     [Refer the Manufacturing Overhead Budget]       (a)	$427,625
Budgeted direct labor hours for the year                        [9,800 + 9,100 + 9,400 + 10,200]                (b)	38,500
Predetermined overhead rate for the year                                                                                                 (a / b)	$11.11

.

.

Working note - Calculatioin of Variable Manufacturing Overhead
	1st Quarter	2nd Quarter	3nd Quarter	4th Quarter	Year
Budgeted Direct Labor Hours                  (a)	9,800	9,100	9,400	10,200	38,500
Variable Manufacturing Overhead rate    (b)	$4.25	$4.25	$4.25	$4.25	$4.25
Variable Manufacturing Overhead            (a x b)	$41,650	$38,675	$39,950	$43,350	$163,625