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	11,900	10,900	12,900	13,900

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 $1.50 per direct labor-hour. The fixed manufacturing overhead is $99,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $39,000 per quarter.

Required:

1. Prepare the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. (Round "Direct labor time per unit (hours)" and "Direct labor cost per hour" answers to 2 decimal places.)

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Required Production in units
Direct labor time per unit (hours)
Total direct labor hours needed
Direct labor cost per hour
Total direct labor cost

2. Prepare the company’s manufacturing overhead budget.

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Variable manufacturing overhead
Fixed Manufactoring Overhead
Total manufacturing overhead
Less depreciation
Cash disbursements for manufacturing overhead

Answer 1

• All working forms part of the answer
• Requirement 1

Working		1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
A	Required Production in units	11,900	10,900	12,900	13,900	49,600
B	Direct labor time per unit (hours)	0.20	0.20	0.20	0.20	0.20
C = Ax B	Total direct labor hours needed	2,380	2,180	2,580	2,780	9,920
D	Direct labor cost per hour	$                    15.00	$                   15.00	$                   15.00	$                   15.00	$                    15.00
E = C x D	Total direct labor cost	$            35,700.00	$           32,700.00	$           38,700.00	$          41,700.00	$          148,800.00

• Requirement 2

Working		1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
A = Total DLH x $1.50	Variable manufacturing overhead	$              3,570.00	$             3,270.00	$             3,870.00	$             4,170.00	$            14,880.00
B	Fixed Manufacturing Overhead	$            99,000.00	$           99,000.00	$           99,000.00	$          99,000.00	$          396,000.00
C = A+B	Total manufacturing overhead	$          102,570.00	$        102,270.00	$        102,870.00	$        103,170.00	$          410,880.00
D	Less depreciation	$            39,000.00	$           39,000.00	$           39,000.00	$          39,000.00	$          156,000.00
E =C - D	Cash disbursements for manufacturing overhead	$            63,570.00	$           63,270.00	$           63,870.00	$          64,170.00	$         254,880.00