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	10,400	9,400	11,400	12,400

Each unit requires 0.25 direct labor-hours and direct laborers are paid $12.00 per hour.

In addition, the variable manufacturing overhead rate is $1.70 per direct labor-hour. The fixed manufacturing overhead is $84,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $24,000 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

1.
	1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total direct labor cost

2&3

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

	1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total manufacturing overhead Cash disbursements for manufacturing overhead

Answer 1

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Requirement 1

Total Labor Cost
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total direct labor cost	$        31,200	$        28,200	$        34,200	$        37,200	$        130,800

Above information is calculated as following

	Units to be produced		Labor hours required per unit		Total Labor Hours		Labor rate per hour		Labor Cost
1st Quarter	10400	X	0.25	=	2600	X	$           12	=	$        31,200
2nd Quarter	9400	X	0.25	=	2350	X	$           12	=	$        28,200
3rd Quarter	11400	X	0.25	=	2850	X	$           12	=	$        34,200
4th Quarter	12400	X	0.25	=	3100	X	$           12	=	$        37,200

Requirement 2

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total manufacturing overhead	$       88,420	$          87,995	$              88,845	$       89,270	$           354,530
Cash disbursements for manufacturing overhead	$       64,420	$          63,995	$              64,845	$       65,270	$           258,530

Above information is calculated as following

Calculation of Variable overhead

	Total Labor Hours		Manufacturing Variable overhead rate per hour		Total Variable manufacturing overhead
1st Quarter	2600	X	$                  1.70	=	$               4,420
2nd Quarter	2350	X	$                  1.70	=	$               3,995
3rd Quarter	2850	X	$                  1.70	=	$               4,845
4th Quarter	3100	X	$                  1.70	=	$               5,270

	Total Variable manufacturing overhead	Fixed Manufacturing overhead	Total Manufacturing Overhead	Depreciation	Cash Disbursement manufacturing Cost= total Manufacturing Overhead-Dep.
1st Quarter	$         4,420	$          84,000	$              88,420	$       24,000	$             64,420
2nd Quarter	$         3,995	$          84,000	$              87,995	$       24,000	$             63,995
3rd Quarter	$         4,845	$          84,000	$              88,845	$       24,000	$             64,845
4th Quarter	$         5,270	$          84,000	$              89,270	$       24,000	$             65,270

Total cash disbursement for manufacturing Cost = Labor Cost+Variable Cost+Fixed Manufacturing Cost

Total Manufacturing Cost = Total Cash Disbursement + Depreciation

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