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
• 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
• This budget indicates the expected profitability of operations for the budget period.
• The budgeted income statement provides the basis for evaluating company
• 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