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	11,100	10,100	12,100	13,100

Each unit requires 0.20 direct labor-hours and direct laborers are paid $12.50 per hour.

In addition, the variable manufacturing overhead rate is $1.50 per direct labor-hour. The fixed manufacturing overhead is $91,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $31,000 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

Direct Labor Budget:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Units to be produced	11100	10100	12100	13100	46400
Direct labor time per unit (hours)	0.20	0.20	0.20	0.20	0.20
Total direct labor hours needed	2220	2020	2420	2620	9280
Direct labor cost per hour	12.50	12.50	12.50	12.50	12.50
Total direct labor cost	27750	25250	30250	32750	116000

Calculation of estimated manufacturing overhead:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Budgeted direct labor-hours	2220	2020	2420	2620	9280
Variable overhead rate	1.50	1.50	1.50	1.50	1.50
Variable manufacturing overhead	3330	3030	3630	3930	13920