Question

The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 3,900 direct labor-hours will be required in January. The variable overhead rate is $5 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,210 per month, including depreciation of $3,550. All other fixed manufacturing overhead costs represent current cash flows. What should be the January cash disbursements for manufacturing overhead on the manufacturing overhead budget?

a. $62,710
b. $58,160
c. $66,260
d. $59,160

Answer 1

The January cash disbursements for manufacturing overhead on the manufacturing overhead budget at Franklyn Corporation are calculated to be $59,160 after factoring out non-cash depreciation from the fixed overhead and adding variable overhead.

Step-by-step explanation:

The January cash disbursements for manufacturing overhead on the manufacturing overhead budget are calculated by adding the budgeted variable overhead to the cash component of the fixed manufacturing overhead. Since depreciation does not affect cash flow, it is subtracted from the fixed overhead.

The variable overhead for January can be found by multiplying the budgeted direct labor hours by the variable overhead rate: 3,900 hours × $5/hour = $19,500. The total fixed manufacturing overhead costs $43,210. Subtracting non-cash depreciation of $3,550, we get cash disbursements for fixed overhead of $43,210 - $3,550 = $39,660. Adding both variable and fixed cash overhead, we get - $19,500 + $39,660 = $59,160.