Exercise 7-12 Direct Labor and Manufacturing Overhead Budgets [LO5, LO6] The Pro

Question

Exercise 7-12 Direct Labor and Manufacturing Overhead Budgets [LO5, LO6]

The Production Department of Harveton Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year.

     In addition, the variable manufacturing overhead rate is $2.00 per direct labor-hour. The fixed manufacturing overhead is $86,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $33,000 per quarter.

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.

The Production Department of Harveton Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year.

Explanation / Answer

1. Direct Labour budget

2. Manufacturing overhead budget

Qrt 1 Qrt 2 Qrt 3 Qrt 4 Total No. of ubits to be produced 23000 22000 21000 22000 88000 Direct labour hours per unit 0.70 0.70 0.70 0.70 0.70 Total direct labour hours 16100 15400 14700 15400 61600 Cost per hour 12 12 12 12 12 Total direct labour cost 193200 184800 176400 184800 739200

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