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	11,200	10,200	12,200	13,200

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 $1.40 per direct labor-hour. The fixed manufacturing overhead is $92,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $32,000 per quarter.

Required:

1. Calculate the company’s total estimated direct labor cost for each quarter of the 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 the upcoming fiscal year and for the year as a whole.

Answer 1

• Requirement 1

		Q1	Q2	Q3	Q4	Year
A	Budgeted Production	11,200	10,200	12,200	13,200	46,800
B	Hours per unit	0.25	0.25	0.25	0.25	0.25
C=A X B	Total no. of hours	2,800	2,550	3,050	3,300	11,700
D	rate per hour	$                   13.00	$                  13.00	$                  13.00	$                   13.00	$                  13.00
E = C x D	Budgeted Labor Cost	$           36,400.00	$          33,150.00	$          39,650.00	$          42,900.00	$       152,100.00

• Requirement 2 & 3

	Q1	Q2	Q3	Q4	Year
Total no. of direct labor hours	2,800	2,550	3,050	3,300	11,700
Variable overhead rate per hour	$                      1.40	$                     1.40	$                    1.40	$                     1.40	$                    1.40
Total variable manufacturing overhead	$             3,920.00	$            3,570.00	$            4,270.00	$             4,620.00	$         16,380.00
Total Fixed overhead	$           92,000.00	$          92,000.00	$          92,000.00	$          92,000.00	$       368,000.00
Total manufacturing overhead	$           95,920.00	$          95,570.00	$          96,270.00	$          96,620.00	$       384,380.00
Less: Depreciation expense	$           32,000.00	$          32,000.00	$          32,000.00	$          32,000.00	$       128,000.00
Cash Disbursement for manufacturing overhead	$           63,920.00	$          63,570.00	$          64,270.00	$          64,620.00	$       256,380.00