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. 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 upcoming fiscal year and for the year as a whole.

Answer 1

1) Estimated labour cost

Particulars	Qtr A	Qtr B	Qtr C	Qtr D	Total
Estimated units	11,500	10,500	12,500	13,500
No.of hrs per unit	0.25	0.25	0.25	0.25
Total labour hours	2,875	2,625	3,125	3,375
Labor Cost per hour	$14	$14	$14	$14
Total labour cost	$40,250	$36,750	$43,750	$47,250
Labour cost for the year as a whole					$ 168,000

2) Estimated Manufacturing overhead cost and cash disbursements

Particulars	Qtr A	Qtr B	Qtr C	Qtr D	Total
Estimated Labour hours	2,875	2,625	3,125	3,375
Variable Overhead rate per hour	$ 1.60	$ 1.60	$ 1.60	$ 1.60
Variable Overhead Cost	$4,600	$4,200	$5,000	$5,400
Fixed overhead cost	$95,000	$95,000	$95,000	$95,000
Manufacturing overhead cost	$99,600	$99,200	$100,000	$100,400
Manufacturing overhead cost for the year					$399,200
Less: Non-cash element (Depreciation)	($35,000)	($35,000)	($35,000)	($35,000)	($140,000)
Cash disbursments	$64,600	$64,200	$65,000	$65,400	$259,200