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   10,000   9,000   11,000   12,000

Each unit requires 0.20 direct labor-hours and direct laborers are paid $12.00 per hour.

In addition, the variable manufacturing overhead rate is $1.50 per direct labor-hour. The fixed manufacturing overhead is $80,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $20,000 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

Answer -

1. Answer -

Calculation:

1st Quarter:

Direct labor hours needed = Units to be produced * Direct labor hours per unit

= 10000 units * 0.20 direct labor hour per unit

= 2000 direct labor hours

Total estimated direct labor costs = Direct labor hours needed * Direct labor cost per hour

= 2000 direct labor hours * $12 per hour

= $24000

2nd Quarter:

Direct labor hours needed = Units to be produced * Direct labor hours per unit

= 9000 units * 0.20 direct labor hour per unit

= 1800 direct labor hours

Total estimated direct labor costs = Direct labor hours needed * Direct labor cost per hour

= 1800 direct labor hours * $12 per hour

= $21600

3rd Quarter:

Direct labor hours needed = Units to be produced * Direct labor hours per unit

= 11000 units * 0.20 direct labor hour per unit

= 2200 direct labor hours

Total estimated direct labor costs = Direct labor hours needed * Direct labor cost per hour

= 2200 direct labor hours * $12 per hour

= $26400

4th Quarter:

Direct labor hours needed = Units to be produced * Direct labor hours per unit

= 12000 units * 0.20 direct labor hour per unit

= 2400 direct labor hours

Total estimated direct labor costs = Direct labor hours needed * Direct labor cost per hour

= 2400 direct labor hours * $12 per hour

= $28800

Year:

Units to be produced:

= 10000 units + 9000 units + 11000 units + 12000 units

= 42000 units

Direct labor hours needed = Units to be produced * Direct labor hours per unit

= 42000 units * 0.20 direct labor hour per unit

= 8400 direct labor hours

Total estimated direct labor costs = Direct labor hours needed * Direct labor cost per hour

= 8400 direct labor hours * $12 per hour

= $100800

2. Answer -

Calculation:

1st Quarter:

Variable manufacturing overhead = Direct labor hours needed * Variable manufacturing overhead rate

= 2000 direct labor hours * $1.50 per direct labor hour

= $3000

Total estimated manufacturing overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead

= $3000 + $80000

= $83000

Here,

Depreciation is noncash elements of manufacturing overhead.

Therefore,

Cash disbursements for manufacturing overhead = Total estimated manufacturing overhead cost - Depreciation

= $83000 - $20000

= $63000

2nd Quarter:

Variable manufacturing overhead = Direct labor hours needed * Variable manufacturing overhead rate

= 1800 direct labor hours * $1.50 per direct labor hour

= $2700

Total estimated manufacturing overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead

= $2700 + $80000

= $82700

Here,

Depreciation is noncash elements of manufacturing overhead.

Therefore,

Cash disbursements for manufacturing overhead = Total estimated manufacturing overhead cost - Depreciation

= $82700 - $20000

= $62700

3rd Quarter:

Variable manufacturing overhead = Direct labor hours needed * Variable manufacturing overhead rate

= 2200 direct labor hours * $1.50 per direct labor hour

= $3300

Total estimated manufacturing overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead

= $3300 + $80000

= $83300

Here,

Depreciation is noncash elements of manufacturing overhead.

Therefore,

Cash disbursements for manufacturing overhead = Total estimated manufacturing overhead cost - Depreciation

= $83300 - $20000

= $63300

4th Quarter:

Variable manufacturing overhead = Direct labor hours needed * Variable manufacturing overhead rate

= 2400 direct labor hours * $1.50 per direct labor hour

= $3600

Total estimated manufacturing overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead

= $3600 + $80000

= $83600

Here,

Depreciation is noncash elements of manufacturing overhead.

Therefore,

Cash disbursements for manufacturing overhead = Total estimated manufacturing overhead cost - Depreciation

= $83600 - $20000

= $63600

Year:

Variable manufacturing overhead = Direct labor hours needed * Variable manufacturing overhead rate

= 8400 direct labor hours * $1.50 per direct labor hour

= $12600

Total estimated manufacturing overhead cost = Variable manufacturing overhead + (Fixed manufacturing overhead * Number of quarters in year)

= $12600 + ($80000 * 4)

= $332600

Here,

Depreciation is noncash elements of manufacturing overhead.

Therefore,

Cash disbursements for manufacturing overhead = Total estimated manufacturing overhead cost - (Depreciation * Number of quarters in year)

= $332600 - ($20000 * 4)

= $252600