EXERCISE 815 Direct Labor and Manufacturing Overhead Budgets [LO85, LO86] 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

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced . . . . . . . . . . . . . 5,000 8,000 7,000 6,000 Each unit requires 0.2 direct labor-hours and direct laborers are paid $12.00 per hour. In addition, the variable manufacturing overhead rate is $1.75 per direct labor-hour. The fixed

manufacturing overhead is $86,000 per quarter. The only noncash element of manufacturing over- head is depreciation, which is $23,000 per quarter.

Required: 1. Prepare the companys 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 pro- duce the forecasted number of units produced.

2. Prepare the companys manufacturing overhead budget.