Question

The Production Department of Hruska Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Units to be produced	11,800	10,800	12,800	13,800

Each unit requires 0.20 direct labor-hours and direct laborers are paid $16.00 per hour.

In addition, the variable manufacturing overhead rate is $1.75 per direct labor-hour. The fixed manufacturing overhead is $98,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $38,000 per quarter.

Required:

1. Calculate the company’s total estimated direct labor cost for each quarter of the upcoming fiscal year and for the year as a whole. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced.

2&3. Calculate the company’s total estimated manufacturing overhead cost and the cash disbursements for manufacturing overhead for each quarter of the upcoming fiscal year and for the year as a whole.

Answer 1

1
		1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
	Units to be produced	11,800	10,800	12,800	13,800	49,200
	Direct labor time per unit	0.20	0.20	0.20	0.20	0.20
	Total direct labor hour needed	2,360	2,160	2,560	2,760	9,840
	Direct labor cost per hour	$16.00	$16.00	$16.00	$16.00	$16.00
	Total direct labor costs	$37,760	$34,560	$40,960	$44,160	$157,440
2&3		1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
	Total direct labor hour needed	2,360	2,160	2,560	2,760	9,840
	variable manufacturing overhead rate	$1.75	$1.75	$1.75	$1.75	$1.75
	Variable manufacturing overhead	$4,130	$3,780	$4,480	$4,830	$17,220
	Fixed manufacturing overhead	$98,000	$98,000	$98,000	$98,000	$392,000
	Total manufacturing overhead	$102,130	$101,780	$102,480	$102,830	$409,220
	Less depreciation	$38,000	$38,000	$38,000	$38,000	$152,000
	Cash disbursements for manufacturing overhead	$64,130	$63,780	$64,480	$64,830	$257,220