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	11,000	10,000	12,000	13,000

Each unit requires 0.30 direct labor-hours and direct laborers are paid $12.50 per hour.

In addition, the variable manufacturing overhead rate is $2.05 per direct labor-hour. The fixed manufacturing overhead is $90,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $30,000 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. 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

	First quarter	Second quarter	Third quarter	Fourth quarter	Year
Production units	11000	10000	12000	13000	46000
Labour hour per unit	0.30	0.30	0.30	0.30	0.30
Production hour	3300	3000	3600	3900	13800
Rate per hour	12.50	12.50	12.50	12.50	12.50
Direct labour cost	41250	37500	45000	48750	172500

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.

	First quater	Second quarter	Third quarter	Fourth quarter	Year
Production hour	3300	3000	3600	3900	13800
Variable overhead rate per hour	2.05	2.05	2.05	2.05	2.05
Variable overhead	6765	6150	7380	7995	28290
Fixed overhead	90000	90000	90000	90000	360000
Total overhead	96765	96150	97380	97995	388290
Less: Depreciation	(30000)	(30000)	(30000)	(30000)	(120000)
Cash disbursement on manufacturing overhead	66765	66150	67380	67995	268290