Direct labour budget
The production budget also provides the starting point for the preparation of the direct labour cost budget. The direct labour hours required to meet production requirements multiplied by the estimated hourly rate yields the total direct labour cost.
We assume that 5 hours of labour are required per unit of product, and that the hourly rate is 5,000 UAH.
SCHEDULE 4
ALFA Company - 2010 Direct labor budget
|
Quarter |
|
|||
|
1 |
2 |
3 |
4 |
TOTAL |
Units to be produced direct labour hours per unit |
790 x5 |
720 x5 |
890 x5 |
820 x5 |
3,220 x5 |
Total needs (hours) Direct labour cost per hour |
3,950 x5 |
3,600 x5 |
4,450 x5 |
4,100 x5 |
16,100 x5 |
Total direct labour cost |
19,750 |
18,000 |
22,250 |
20,500 |
80,500 |
Factory overhead budget
We assume that total factory overhead is budgeted at 6,000,000 UAH per quarter plus 2,000 UAH per hour of direct labour. All overhead costs involving cash outlays are paid in the quarter in which they are incurred. We should also bear in mind that depreciation does not entail a cash outlay and therefore must be deducted from the total factory overhead we assume that depreciation expenses are 3,250,000 per quarter.
SCHEDULE 5
ALFA Company - 2010 Factory overhead budget
|
Quarter |
|
|||
|
1 |
2 |
3 |
4 |
TOTAL |
Budgeted direct labour hours Variable overhead rate (UAH) |
3,950 x2 |
3,600 x2 |
4,450 x2 |
4,100 x2 |
16,100 x2 |
Variable overhead budgeted Fixed overhead budgeted |
7,900 6,000 |
7,200 6,000 |
8,900 6,000 |
8,200 6,000 |
32,200 24,000 |
Total budgeted overhead |
13,900 |
13,200 |
14,900 |
14,200 |
56,200 |
Less: depreciation |
3,250 |
3,250 |
3,250 |
3,250 |
13,000 |
Cash disbursements for overhead |
10,650 |
9,950 |
11,650 |
10,950 |
43,200 |
ENDING INVENTORY BUDGET
For the ending inventory budget, the variable cost for finished goods must be computed.
SCHEDULE 6
|
Unit cost (UAH) |
Units |
Total (UAH) |
Direct materials Direct labour Variable overhead |
2 5 2 |
3 kg 5 hours 5 hours |
6 25 10 |
Total variable manufacturing cost |
|
|
41 |
ALFA Company - 2010 Ending inventory
|
Unit |
Units cost (UAH) |
Total (UAH) |
Direct materials Finished goods |
250 kg 100 units |
2 41 |
500 4,100 |