Edwards Inc. bases its manufacturing overhead budget on budgeted direct labor-ho

Question

Edwards Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $4.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $39,590 per month, which includes depreciation of $5,920. All other fixed manufacturing overhead costs represent current cash flows. The November direct labor budget indicates that 3,700 direct labor-hours will be required in that month.

Required:
a. Determine the cash disbursements for manufacturing overhead for November. Show your work
b. Determine the predetermined overhead rate for November. Show your work.

Explanation / Answer

a. Cash disbursements for manufacturing overheads for November will be $ 39,590 less $ 5,920 being non-cash expenditure (depreciation) = 33,670 $ b. Pre-determined overhead rate for November will be the manufacturing overheads divided by the no. of direct labour hours Hence, the pre-determined overhead rate for November will be $ 9.1 per labour hour

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