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

1. Manufacturing overhead budget:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted direct labor-hours	9,800	9,100	9,400	10,200	38,500
Variable overhead rate	x $4.25	x $4.25	x $4.25	x $4.25	x $4.25
Variable manufacturing overhead	$41,650	$38,675	$39,950	$43,350	$163,625
Fixed manufacturing overhead	$66,000	$66,000	$66,000	$66,000	$264,000
Total manufacturing overhead	$107,650	$104,675	$105,950	$109,350	$427,625
Less: Depreciation	$16,500	$16,500	$16,500	$16,500	$66,000
Cash disbursement for manufacturing overhead	$91,150	$88,175	$89,450	$92,850	$361,625

Manufacturing overhead budget
	Cash disbursement for manufacturing overhead
1st Quarter	$91,150
2nd Quarter	$88,175
3rd Quarter	$89,450
4th Quarter	$92,850
Year	$361,625

2.

Total budgeted manufacturing overhead for the year (a)	$427,625
Total Budgeted direct labor-hours for the year (b)	38,500
Predetermined Manufacturing overhead for the year (a /b)	$11.11