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	11,600	10,600	12,600	13,600

Each unit requires 0.20 direct labor-hours and direct laborers are paid $15.00 per hour.

In addition, the variable manufacturing overhead rate is $1.75 per direct labor-hour. The fixed manufacturing overhead is $96,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $36,000 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

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.

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Production units	11600	10600	12600	13600	48400
Labour hour per unit	0.20	0.20	0.20	0.20	0.20
Production labour hour	2320	2120	2520	2720	9680
Rate per hour	15	15	15	15	15
Direct labour cost	34800	31800	37800	40800	145200

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
Production labour hour	2320	2120	2520	2720	9680
Variable manufacturing overhead per hour	1.75	1.75	1.75	1.75	1.75
Variable manufacturing overhead	4060	3710	4410	4760	16940
Fixed manufacturing overhead	96000	96000	96000	96000	384000
Total manufacturing overhead	100060	99710	100410	100760	400940
Less: Depreciation	-36000	-36000	-36000	-36000	-144000
Cash disbursement for manufacturing overhead	64060	63710	64410	64760	256940