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	10,800	9,800	11,800	12,800

Each unit requires 0.25 direct labor-hours and direct laborers are paid $13.00 per hour.

In addition, the variable manufacturing overhead rate is $1.90 per direct labor-hour. The fixed manufacturing overhead is $88,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $28,000 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.

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

--Requirement 1

Direct Labor Budget
		1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
A	Required production in units	10800	9800	11800	12800	45200
B	Direct labor time per unit (hours)	0.25	0.25	0.25	0.25	0.25
C = A x B	Total DLHs needed	2700	2450	2950	3200	11300
D	Direct labor cost per hour	$13.00	$13.00	$13.00	$13.00	$13.00
E = C x D	Total direct labor cost	$35,100	$31,850	$38,350	$41,600	$146,900

--Requirement 2

Manufacturing Overhead Budget
		1st Qtr	2nd Qtr	3rd Qtr	4th Qtr	Year
A = Variable rate x Total DLHs needed	Variable manufacturing overhead	$5,130	$4,655	$5,605	$6,080	$21,470
B	Fixed manufacturing overhead	$88,000	$88,000	$88,000	$88,000	$352,000
C = A+B	Total manufacturing overhead	$93,130	$92,655	$93,605	$94,080	$373,470
D	Less: Depreciation	$28,000	$28,000	$28,000	$28,000	$112,000
E = C - D	Cash disbursements for manufacturing overhead	$65,130	$64,655	$65,605	$66,080	$261,470