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ADMS 3510 (8)
Chapter

acc6.doc

3 Pages
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Department
Administrative Studies
Course Code
ADMS 3510
Professor
Rebecca Jubis

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Description
Manufacturing Overhead Budget • The manufacturing overhead budget shows the expected manufacturing overhead costs for the budget period. • As shown in manufacturing budget below, this budget distinguishes between variable and fixed overhead costs. • Hayes Company expects variable costs to fluctuate with the production volume based on the following rates per direct labour hour: indirect materials $1; indirect labour $1.40; utilities $0.40; and maintenance $0.20. • Hayes also recognizes that some maintenance is fixed. The amounts reported for fixed costs are assumed in our example. Selling and Administrative Expenses Budget • Hayes Company combines its operating expenses into one budget, the selling and administrative expenses budget - Projects selling and administrative expenses for the budget period. • Expenses are classified as either variable or fixed. In this case, the variable expense rates per unit of sales are $3 of sales commissions and $1 of freight out. • Variable expenses per quarter are based on the unit sales from the sales budget • For example, sales in the first quarter are expected to be 3,000 units. Thus, the sales commissions expense is $9,000 (3,000 × $3), and freight out is $3,000 (3,000 × $1). • Fixed expenses are based on assumed data. Budgeted Income Statement • The budgeted income statement is the important end product of the operating budgets. • This budget indicates the expected profitability of operations for the budget period. • The budgeted income statement provides the basis for evaluating company performance. • As you would expect, this budget is prepared from the various operating budgets. • To calculate the cost of goods sold, it is first necessary to determine the total cost per unit of pr
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