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

Question

Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,000 direct labor-hours will be required in January. The variable overhead rate is $1.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,350 per month, which includes depreciation of $9,000. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$109,150

$8,800

$100,150

$91,350

Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,000 direct labor-hours will be required in January. The variable overhead rate is $1.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,350 per month, which includes depreciation of $9,000. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Explanation / Answer

Variable overhead = ( $1.10 x 8000 ) = $ 8800 Fixed overhead including depreciation . $ 1,00,350.00 Less - Non-cash depreciation expense . . $ 9,000.00 Fixed overhead cash outflows . . . . . . . . . $ 91,350.00 Cash disbursements for manufacturing overhead = ( $8800 + $ 91350 ) = $ 100150

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