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	11,500	10,500	12,500	13,500

Each unit requires 0.25 direct labor-hours and direct laborers are paid $14.00 per hour.

In addition, the variable manufacturing overhead rate is $1.60 per direct labor-hour. The fixed manufacturing overhead is $95,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $35,000 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.

Direct Labor Budget
	Quarter
	1	2	3	4	Year
Units to be produced (a)	11,500	10,500	12,500	13,500
Direct labor hours per unit (b)	0.25	0.25	0.25	0.25
Total direct labor hours needed (a x b)	2,875.00	2,625.00	3,125.00	3,375.00
Direct labor cost per hour (c )	14	14	14	14
Cost of labor {(axb) x c)	40,250.00	36,750.00	43,750.00	47,250.00	168,000.00

2.

Calculation of Manufacturing Overhead Cost
	1	2	3	4	Year
Total direct labor hours needed	2,875.00	2,625.00	3,125.00	3,375.00
Variable manufacturing overhead rate	1.60	1.60	1.60	1.60
Total Variable manufacturing overhead (Total direct labor hours needed x Variable manufacturing overhead rate)	4,600.00	4,200.00	5,000.00	5,400.00
Total fixed manufacturing overhead	95,000.00	95,000.00	95,000.00	95,000.00
Total estimated manufacturing overhead (Total Variable manufacturing overhead + Total fixed manufacturing overhead)	99,600.00	99,200.00	100,000.00	100,400.00	399,200.00

3.

Calculation of Cash Disbursement or Manufacturing overhead
	1	2	3	4	Year
Total estimated manufacturing overhead	99,600.00	99,200.00	100,000.00	100,400.00
Depreciation expense	(35,000.00)	(35,000.00)	(35,000.00)	(35,000.00)
Cash disbursement (Total estimated manufacturing overhead-Depreciation expense)	64,600.00	64,200.00	65,000.00	65,400.00	259,200.00

Kindly comment if you need further assistance.

Thanks‼!