Question

Manufacturing overhead expenses are budgeted at $2,000 per month. Included in the $2,000 are $500 of monthly depreciation expense and $200 of allocated expenses related to manufacturing insurance that was paid in February. What is the cash outflow for overhead for the month of January

Answer 1

$1500

Step-by-step explanation:

The reason is that the allocated expense of $200 related to insurance would be paid in February and we are considering the cash outflow the month January. Because the insurance expenses are paid one month later which would not exceed the overhead budget set. This means that the net cash effect would be $1500 because the $500 depreciation is non cash flow in nature.