Mouw Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The directlabor budget indicates that 5,400 direct labor-hours will be required in January. The variableoverhead rate is $4.40 per direct labor-hour. The company's budgeted fixed manufacturingoverhead is $77,220 per month, which includes depreciation of $9,720. All other fixedmanufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
Variable overhead = 5,400 direct labor-hours x $4.40 = $23,760Cash portion of fixed manufacturing overhead = $77,220 - $9,720 = $67,500Total cash disbursement for overhead in January = $23,760 + $67,500 = $91,260
Hardin, Inc, has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on May 31 contained 1,020 units. The companyneeds to prepare a production budget for the next five months. The total number of units produced in July should be:
Units produced = Ending inventory + Units sold - Beginning inventory=(6,000 x 15%) + 5,600 - (5,600 x 15%) = 5,660
The cash budget must be prepared before you can complete the:
budgeted balance sheet
A self-imposed budget can be a very effective control device in an organization.