Asked by Emily Treadaway on May 12, 2024
Verified
The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $75,000 per month, of which $15,000 is factory depreciation.If the budgeted cash disbursements for manufacturing overhead for December total $105,000, then the budgeted direct labor-hours for December must be:
A) 6,000 direct labor-hours
B) 21,000 direct labor-hours
C) 9,000 direct labor-hours
D) 3,000 direct labor-hours
Cash Disbursements
The outflow of cash for expenses, investment purchases and other payments.
Manufacturing Overhead Budget
A financial plan that estimates the expected indirect costs of producing goods or services, excluding direct materials and direct labor.
Direct Labor-Hour
A measure of the amount of time spent by workers who are directly involved in the production process of creating goods or services.
- Calculate the projected cash outflows for manufacturing overhead by determining the relation between direct labor-hours and overhead rates.
Verified Answer
Budgeted variable manufacturing overhead per direct labor-hour = $5.00
Let x be the budgeted direct labor-hours for December.
Then, the budgeted manufacturing overhead for December can be calculated as:
$60,000 + ($5.00 * x) = $105,000
Solving for x, we get:
x = 9,000 direct labor-hours
Therefore, the best choice is C, 9,000 direct labor-hours.
Learning Objectives
- Calculate the projected cash outflows for manufacturing overhead by determining the relation between direct labor-hours and overhead rates.
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