# Chapter 39 - University of North Florida

```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
&times;
Labor hours
per unit
&times;
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.
2
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
3
26,000
0.05
1,300
\$20
\$ 26,000
From
production
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
4
26,000
\$ 1.50
\$39,000
Actual Costing
Budgeted MOH =
Variable costs + Fixed costs =
Cost per unit
&times;
of
production
Number of
units to be
produced
Fixed
+ Total
Costs
Remains constant
at all activity levels
5
 Includes only operating costs
 i.e., Period costs
 Selling costs
 Corporate costs
 Salaries
 Office expenses
 Rent
 Insurance
6
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
7,000
Insurance expense
4,000
Total fixed expenses
Total budgeted selling &amp; administrative expenses
7
\$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
9
```