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 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	10000	9000	11000	12000	42000
Labour hour per unit	0.20	0.20	0.20	0.20	0.20
Budgeted labour hour	2000	1800	2200	2400	8400
Rate per hour	12	12	12	12	12
Budgeted direct labour cost	24000	21600	26400	28800	100800

2&3) Manufacturing overhead budget :

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Direct labour hour	2000	1800	2200	2400	8400
Variable manufacturing overhead rate	1.50	1.50	1.50	1.50	1.50
Variable manufacturing overhead	3000	2700	3300	3600	12600
Fixed manufacturing overhead	80000	80000	80000	80000	320000
Total manufacturing overhead	83000	82700	83300	83600	332600
Less: Depreciation	-20000	-20000	-20000	-20000	-80000
Cash disbursement on manufacturing overhead	63000	62700	63300	63600	252600