Chapter 39
Managerial Accounting
Other Operating
Budgets
Prepared by Diane Tanner
University of North Florida
Direct Labor Budget
Budgeted direct labor =
Number of
units to be
produced
×
Labor hours
per unit
×
Rate per
hour
If labor hours are given in minutes, you
must convert to hours.
Example: 12 minutes = 0.20 hours
Fringe benefits are included as
part of the labor wage rate.
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Direct Labor Budget Example
At Dinker Co. each coffee mug of product requires 3 minutes
of direct labor. Workers are paid $18.50 per hour. Fringe
benefits are $1.50 per hour. The company plans to produce
26,000 mugs in May.
Units to be produced
Direct labor hours (3/60)
Labor hours required
Hourly wage rate
Budgeted direct labor cost
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26,000
0.05
1,300
$20
$ 26,000
From
production
budget
Manufacturing Overhead Budget
Normal Costing Example
AT, Inc. produced 26,000 units and sold 25,000 of them in
April. applies manufacturing overhead rate of $1.50 per unit
produced.
Production in units
Manufacturing overhead rate
Budgeted manufacturing overhead costs
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26,000
$ 1.50
$39,000
Manufacturing Overhead Budget
Actual Costing
Budgeted MOH =
Variable costs + Fixed costs =
Cost per unit
×
of
production
Number of
units to be
produced
Fixed
+ Total
Costs
Remains constant
at all activity levels
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Selling & Administrative Expense Budget
 Includes only operating costs
 i.e., Period costs
 Selling costs
 General and administrative costs
 Corporate costs
 Salaries
 Advertising
 Office expenses
 Rent
 Insurance
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Selling and Administrative Budget Format
During May, AT, Inc. produced 6,400 units and sold 6,600 units during
May. It estimated administrative supplies would cost $0.50 per unit,
and sales clerk wages would cost $1.60 per unit. Additionally, it
estimated $5,000 for corporate depreciation, $11,000 for utilities,
$7,000 for office admin costs, and $4,000 for insurance.
Variable expenses:
Supplies expense ($0.50 x 6,600)
$ 3,300
Wages expense ($1.60 x 6,600)
10,560
Fixed expenses:
Corporate depreciation
$ 5,000
Utilities expense
11,000
Office administrative costs
7,000
Insurance expense
4,000
Total fixed expenses
Total budgeted selling & administrative expenses
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$13,860
27,000
$40,860
Capital Expenditures Budget
 Based on capital budgeting decisions that are
deemed acceptable
 Property, plant and equipment
 Shows how much cash will be paid out to buy
plant assets and intangible assets
 Must be carefully planned
 Consume substantial cash reserves
The End
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