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Other Operating Budgets Managerial Accounting Prepared by Diane Tanner University of North Florida Chapter 39
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If labor hours are given in minutes, you must convert to hours. Example: 12 minutes = 0. 20 hours 2 Direct Labor Budget Number of units to be produced Labor hours per unit Rate per hour ×× Budgeted direct labor = Fringe benefits are included as part of the labor wage rate.
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Units to be produced 26,000 Direct labor hours (3/60) 0.05 Labor hours required 1,300 Hourly wage rate $20 Budgeted direct labor cost $ 26,000 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. 3 From production budget
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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. 4 Production in units 26,000 Manufacturing overhead rate $ 1.50 Budgeted manufacturing overhead costs $39,000
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5 Manufacturing Overhead Budget Actual Costing Remains constant at all activity levels Number of units to be produced Cost per unit of production Budgeted MOH = Variable costs + Fixed costs = × + Total Fixed Costs
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6 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 7 Variable expenses: Supplies expense ($0.50 x 6,600)$ 3,300 Wages expense ($1.60 x 6,600)10,560$13,860 Fixed expenses: Corporate depreciation $ 5,000 Utilities expense11,000 Office administrative costs7,000 Insurance expense4,000 Total fixed expenses 27,000 Total budgeted selling & administrative expenses $40,860 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.
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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
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9 The End
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