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	10,000	9,200	9,500	10,300

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.50 per direct labor-hour and its total fixed manufacturing overhead is $68,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $17,000 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

1.

Yuvwell Corporation
Manufacturing overhead budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted labor hours	10,000	9,200	9,500	10,300	$    39,000
Variable manufacturing overhead rate	$              4.50	$                4.50	$               4.50	$               4.50	$         4.50
Variable manufacturing overhead (hours * rate)	$         45,000	$           41,400	$          42,750	$          46,350	$ 175,500
Fixed manufacturing overhead	$         68,000	$           68,000	$          68,000	$          68,000	$ 272,000
Total manufacturing overhead	$       113,000	$         109,400	$        110,750	$        114,350	$ 447,500
Less: Depreciation	$         17,000	$           17,000	$          17,000	$          17,000	$    68,000
Cash disbursments for manufacturing overhead	$         96,000	$           92,400	$          93,750	$          97,350	$ 379,500

2.

Total budgeted budgeted manufacturing overhead for the year	$    447,500
Budgeted labor hours for the year	$      39,000
Predetermined overhead rate for the year ($447,500/39,000)	$ 11.47436

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