DL and MOH budget: The Production Department of Top of The World 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 10,700 9,700 11,700 12,700 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 $2.00 per direct labor-hour. The fixed manufacturing overhead is $67,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $16,000 per quarter. a. 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. b. 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 and Explanation:

a. The computation of the total estimated direct labor cost is shown below:

Particulars     1st Quarter2nd Quarter3rd Quarter4th QuarterYear

Units to be produced10,7009,70011,70012,70044,800

Multiply  Direct labor hour per unit0.250.250.250.250.25

Total Direct labor hour required267524252925317511200

Multiply  Direct labor rate per hour$14$14$14$14$14

Estimated Direct labor cost$37,450$33,950$40,950$44,450$156,800

b.  The total estimated manufacturing cost and the cash disbursement is shown below:

Particulars 1st Quarter2nd Quarter3rd Quarter4th QuarterYear

Units to be produced10,7009,70011,70012,70044,800

Direct labor hour per unit0.250.250.250.250.25

Multiply Total Direct labor hour required267524252925317511200

Variable manufacturing overhead rate$2$2$2$2$2

Estimated Variable manufacturing overhead cost$5,350$4,850$5,850$6,350$22,400

Add: Fixed manufacturing overhead$67,000$67,000$67,000$67,000$268,000

Total estimated manufacturing overhead$72,350$71,850$72,850$73,350$290,400

Less: depreciation$16,000$16,000$16,000$16,000$64,000

Cash disbursement for manufacturing overhead$56,350$55,850$56,850$57,350$226,400

We simply applied the above format to find out the manufacturing overhead, cash disbursement, and the direct labor cost

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