Question

Yuvwell Corporation’s direct labor budget for next year contained the following information:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted direct labor-hours 8,000 8,200 8,500 7,800
The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $3.25 per direct labor-hour and its total fixed manufacturing overhead is $48,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation of $16,000 per quarter.

we need for the overhead budget:
budgeted direct labor-hours
variable manufacturing overhead rate
variable manufacturing overhead
fixed manufacturing overhead
total manufacturing overhead
less: deprectiation
cash disbursements for manufacturing overhead

Required:
Prepare the company’s manufacturing overhead budget for next year.
Compute the company’s predetermined overhead rate (including both variable and fixed manufacturing overhead) for next year.

Answer 1

To prepare the manufacturing overhead budget for Yuvwell Corporation for each quarter and compute the predetermined overhead rate, follow these steps:

### Step 1: Prepare the Overhead Budget

Let's break down the calculations for each component of the budget.

#### Given Data:
- Variable manufacturing overhead rate: $3.25 per direct labor-hour
- Total fixed manufacturing overhead: $48,000 per quarter
- Depreciation included in fixed overhead: $16,000 per quarter
- Budgeted direct labor-hours for each quarter:

| Quarter | Budgeted Direct Labor-Hours |
|--------------|------------------------------|
| 1st Quarter | 8,000 |
| 2nd Quarter | 8,200 |
| 3rd Quarter | 8,500 |
| 4th Quarter | 7,800 |


### Calculations for Each Quarter

For each quarter, calculate the following:

1. **Variable Manufacturing Overhead**:
\[
\text{Variable Manufacturing Overhead} = \text{Budgeted Direct Labor-Hours} \times \text{Variable Manufacturing Overhead Rate}
\]

2. **Total Manufacturing Overhead**:
\[
\text{Total Manufacturing Overhead} = \text{Variable Manufacturing Overhead} + \text{Fixed Manufacturing Overhead}
\]

3. **Cash Disbursements for Manufacturing Overhead** (which excludes depreciation):
\[
\text{Cash Disbursements} = \text{Total Manufacturing Overhead} - \text{Depreciation}
\]

### Manufacturing Overhead Budget Table

| Quarter | Budgeted Direct Labor-Hours | Variable Manufacturing Overhead Rate | Variable Manufacturing Overhead | Fixed Manufacturing Overhead | Total Manufacturing Overhead | Less: Depreciation | Cash Disbursements |
|--------------|------------------------------|-------------------------------------|-------------------------------|------------------------------|-----------------------------|--------------------|---------------------|
| 1st Quarter | 8,000 | $3.25 | $26,000 | $48,000 | $74,000 | $16,000 | $58,000 |
| 2nd Quarter | 8,200 | $3.25 | $26,650 | $48,000 | $74,650 | $16,000 | $58,650 |
| 3rd Quarter | 8,500 | $3.25 | $27,625 | $48,000 | $75,625 | $16,000 | $59,625 |
| 4th Quarter | 7,800 | $3.25 | $25,350 | $48,000 | $73,350 | $16,000 | $57,350 |

### Step 2: Compute the Predetermined Overhead Rate

The predetermined overhead rate is calculated as follows:

\[
\text{Predetermined Overhead Rate} = \frac{\text{Total Manufacturing Overhead}}{\text{Total Budgeted Direct Labor-Hours}}
\]

**Total Budgeted Direct Labor-Hours for the Year**:
\[
8,000 + 8,200 + 8,500 + 7,800 = 32,500 \text{ hours}
\]

**Total Variable Manufacturing Overhead for the Year**:
\[
(8,000 \times 3.25) + (8,200 \times 3.25) + (8,500 \times 3.25) + (7,800 \times 3.25) = 26,000 + 26,650 + 27,625 + 25,350 = 105,625
\]

**Total Fixed Manufacturing Overhead for the Year**:
\[
48,000 \times 4 = 192,000
\]

**Total Manufacturing Overhead**:
\[
105,625 + 192,000 = 297,625
\]

**Predetermined Overhead Rate**:
\[
\text{Predetermined Overhead Rate} = \frac{297,625}{32,500} \approx 9.15 \text{ per direct labor-hour}
\]

### Summary:
- **Manufacturing Overhead Budget** is filled out as shown.
- **Predetermined Overhead Rate**: $9.15 per direct labor-hour.