Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in January. The variable overhead rate is $1.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $102,950 per month, which includes depreciation of $19,880. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
A)$115,730
B)$95,850
C)$12,780
D)$83,070

Question

Quizplus · Accepted Answer

The cash disbursements for manufacturing overhead include variable overhead and cash-based fixed overhead. Variable overhead is 7,100 hours * $1.80 = $12,780. Fixed overhead cash flows are $102,950 - $19,880 = $83,070. Total cash disbursements = $12,780 + $83,070 = $95,850.