Reference: 07-12
The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with
$16,000 of this amount being factory depreciation. Variable factory overhead is paid in the month incurred.
-If the budgeted cash disbursements for factory overhead for September are $80,000, then the budgeted production in units for September must be?
A)7,000.
B)6,500.
C)7,400.
D)6,200.

Question

Quizplus · Accepted Answer

The budgeted cash disbursements for factory overhead include variable overhead and fixed overhead excluding non-cash items like depreciation. Given $80,000 disbursements, $75,000 fixed overhead, and $16,000 depreciation, the cash fixed overhead is $59,000. Thus, variable overhead is $21,000 ($80,000 - $59,000). At $3.00 per unit, production is 7,000 units ($21,000 / $3.00).

Reference: 07-12 the Culver Company Is Preparing Its Manufacturing Overhead Budget for Budget