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	10,700	9,700	11,700	12,700

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 $1.80 per direct labor-hour. The fixed manufacturing overhead is $87,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $27,000 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

1.

Hruska Corporation
Direct labour budget
For the year ended December 31,
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year	Working
Required production in units	10,700	9,700	11,700	12,700		a
Direct labour hour per unit	0.25	0.25	0.25	0.25		b
Total direct labour hours needed	2,675	2,425	2,925	3,175		c = a*b
Direct labour cost per hour	$              13	$                13	$               13	$               13		d
Total direct labour cost	$      34,775	$        31,525	$       38,025	$       41,275	$ 145,600	e = c*d

2.3.

Hruska Corporation
Manufacturing overhead budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year	Working
Required production in units	10,700	9,700	11,700	12,700		a
Direct labour hour per unit	0.25	0.25	0.25	0.25		b
Total direct labour hours needed	2,675	2,425	2,925	3,175		c = a*b
Variable manufacturing overhead rate per hour	$              1.80	$                1.80	$               1.80	$               1.80		d
Variable manufacturing overhead	$            4,815	$              4,365	$            5,265	$            5,715		e = c*d
Fixed manufacturing overhead	$         87,000	$           87,000	$          87,000	$          87,000
Total manufacturing overhead	$         91,815	$           91,365	$          92,265	$          92,715	$ 368,160
Less: Depreciation	$         27,000	$           27,000	$          27,000	$          27,000
Cash disbursment for manufacturing overhead	$         64,815	$           64,365	$          65,265	$          65,715	$ 260,160

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