Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hour

Question

Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 6,300 direct labor-hours will be required in May. The variable overhead rate is $4.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $116,000 per month, which includes depreciation of $9,650. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$143,090

$27,090

$106,350

$133,440

Explanation / Answer

Shuck Inc. Sr No Details Hrs /Amt $ a Direct labor hour budgeted for May                        6,300.00 b Variable Overhead rate / DLH $                                 4.30 c Total budgeted Variable Overhead for May $ =a*b=                      27,090.00 d Fixed Manufacturing Overhead budgeted for May $                    116,000.00 e Total budgeted Overhead for May $ =c+d =                    143,090.00 f Less : Depreciation in May $                        9,650.00 g Total Budgeted cash disbursement for Manufacturing OH in May =e-f =                    133,440.00 So last option is correct

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