Prepared by Diane Tanner University of North Florida

Chapter 39 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 2

Direct Labor Budget Example From production budget At Dinker Co. each unit of product requires 3 minutes of direct labor. Workers are paid $8.50 per hour. Fringe benefits are $1.50 per hour. 3

Remain constant at all activity levels Manufacturing Overhead Budget Budgeted MOH = Variable costs + Fixed costs = Cost per unit of production Number of units to be produced Total Fixed Costs + × 4

Manufacturing Overhead Budget – Normal Costing Example • Dinker Co. uses a variable manufacturing overhead rate of $1.50 per unit produced. • Fixed manufacturing overhead is $50,000 per month and includes $20,000 of depreciation of plant assets) 5

Includes only operating costs i.e., period costs Selling costs General and administrative costs Corporate costs Salaries Advertising Office expenses Rent Insurance Selling & Administrative Expense Budget 6

Selling and Administrative Budget Example • Variable S&A expenses are $0.50 per unit sold. • Fixed selling and administrative expenses • $70,000 per month, and include $6,000 in depreciation and $4,000 of amortization. 7

Acquired from the capital budgeting decisions 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 Capital Acquisitions Budget

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Prepared by Diane Tanner University of North Florida