Question at position 8 Davis Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $1.70 per direct labor-hour; the budgeted fixed manufacturing overhead is $116,000 per month, of which $30,000 is factory depreciation. If the budgeted direct labor time for November is 7,000 hours, then the total budgeted cash disbursements for manufacturing overhead for November must be: $127,900$86,000$97,900$41,900Single choice
A
$127,900
B
$86,000
C
$97,900
D
$41,900

Question

Question at position 8 Davis Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $1.70 per direct labor-hour; the budgeted fixed manufacturing overhead is $116,000 per month, of which $30,000 is factory depreciation. If the budgeted direct labor time for November is 7,000 hours, then the total budgeted cash disbursements for manufacturing overhead for November must be: $127,900$86,000$97,900$41,900Single choice

A

$127,900

B

$86,000

C

$97,900

D

$41,900

BlackTom AI · Accepted Answer

To analyze the budgeted manufacturing overhead for November, start by separating variable and fixed components.
Option A ($127,900): This sum would be the combination of the full fixed overhead ($116,000) plus the variable overhead for November ($11,900). However, cash disbursements exclude noncash items like depreciation, so including the entire fixed overhead as cash disbursement is incorrect when part of the fixed amount ($30,000) is depreciation.
Option B ($86,000): This number represents the fixed cash portion of overhead, calculated as total fixed overhead ($116,000) minus noncash depreciation ($30,000). It ignores the variable overhead that would be incurred for November, so it underreports total cash disbursements.
Option C ($97,900): This figure combines both components correctly for cash disbursements: variable overhead for November ($1.70 per direct labor-hour × 7,000 hours = $11,900) plus the cash portion of fixed overhead ($116,000 − $30,000 depreciation = $86,000). The sum $11,900 + $86,000 equals $97,900.
Option D ($41,900): This amount is far too low and does not align with either the full variable overhead or the correct fixed cash portion. It could only reflect a partial calculation that omits one or more required components.
In summary, the essential idea is to treat variable overhead based on labor-hours and to include only the cash-bearing portion of fixed overhead (excluding depreciation). The combination in Option C accurately reflects both components of November’s manufacturing overhead cash disbursements.

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