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 rete is 31.75 per direct labor-hour. The fixed manufacturing overhead is 386,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $23,000 per quarter
Required:
a. Prepare the company's direct labor budget for the upcoming fiscal year, assuming that the direct Labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.
b. Prepare the company's manufacturing overhead budget.

Hruska Corporation

Production Department

a. Direct labor budget:

                                            1st          2nd         3rd           4th        Year

                                        Quarter   Quarter    Quarter    Quarter    Total

Units to be produced      12,000    10,000     13,000    14,000    49,000

Hours required per unit    0.2         0.2            0.2        0.2           0.2

Total hours required       2,400      2,000       2,600    2,800       9,800

Direct labor rate                $12          $12           $12        $12            $12

Total labor cost             $28,800    $24,000   $31,200  $33,600  $117,600

b. Manufacturing overhead budget:

                                            1st          2nd         3rd           4th              Year

                                         Quarter   Quarter    Quarter    Quarter         Total

Total labor hours              2,400      2,000       2,600    2,800          9,800

Variable overhead:

$31.75 per labor hour $76,200  $63,500    $82,550  $83,350      $311,150

Fixed overhead          386,000   386,000    386,000  386,000    1,544,000

Total overhead        $462,000  $449500 $468,550 $469,350 $1,855,150

Explanation:

a) Direct labor budget is the planned expenditure on direct labor for manufacturing or production.  It is the product of the rate of labor (per hour) and the total labor hours.

b) The manufacturing overhead budget comprises the variable overhead and the fixed overhead for manufacturing of goods.  It is important to differentiate the two in order to determine the variable cost of production under the variable costing system.