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	12,000	10,000	13,000	14,000

Each unit requires 0.2 direct labor-hours and direct laborers are paid $12.00 per hour.

In addition, the variable manufacturing overhead rate is $1.75 per direct labor-hour. The fixed manufacturing overhead is $86,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $23,000 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.

Direct labour budget

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Units to be produced (a)	12,000	10,000	13,000	14,000	49,000
Direct labour hours per unit (b)	0.2	0.2	0.2	0.2	0.2
Direct labour hours needed (c) = (a*b)	2,400	2,000	2,600	2,800	9,800
Direct labour rate per hour (d)	12	12	12	12	12
Direct labour cost (e) = (c*d)	28,800	24,000	31,200	33,600	117,600

2&3.

Manufacturing overhead budget

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Direct labour hours needed (a)	2,400	2,000	2,600	2,800	9,800
Variable manufacturing overhead rate per hour (b)	1.75	1.75	1.75	1.75	1.75
Variable manufacturing overhead cost (c) = (a*b)	4,200	3,500	4,550	4,900	17,150
Fixed manufacturing overhead (d)	86,000	86,000	86,000	86,000	344,000
Manufacturing overhead cost (e) = (c+d)	90,200	89,500	90,550	90,900	361,150

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Manufacturing overhead cost	90,200	89,500	90,550	90,900	361,150
Less : Depreciation	23,000	23,000	23,000	23,000	92,000
Cash disbursements for manufacturing overhead	67,200	66,500	67,550	67,900	269,150