The direct labor budget indicates that 1,600 direct labor-hours will be required in December. The variable overhead rate is calculated at $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $25,120 per month, which includes depreciation of $5,440. All variable and fixed manufacturing overhead costs are paid in the month incurred. The budgeted December cash payments for total manufacturing overhead is:

Cash disbursement december= $6,586.67

Explanation:

Giving the following information:

Estimated direct labor hours= 1,600 hours

Predetermined overhead rate= $4.40 per direct labor-hour.

The company's budgeted fixed manufacturing overhead is $25,120 per month, which includes depreciation of $5,440.

First, we need to calculate the allocated overhead for the period:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 4.4*1,600= $7,040

The depreciation expense is not a cash disbursement. We need to prorate the depreciation expense for December.

Monthly depreciation expense= 5,440/12= 453.33

Cash disbursement december= 7,040 - 453.33= $6,586.67

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