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    15 views22 pages

    Budgeting Mcs

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    Nisha Sharma

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    © All Rights Reserved
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    CHAPTER BUDGETING : MANAGEMENT ConrtTROL PROCESS OTe kid Understand the meaning, objectives and importance of budgetary control. * Types of budgets commonly used. Difference between a fixed and a flexible budget. Preparing various budgets. © Performance budgeting vs. programme budgeting. + Zero-base budgeting. * Activity based budgeting and rolling budgets. INTRODUCTION Planning is the basic managerial function. It helps in determining the course of action to be followed for achieving organisational goals. It is decision in advance; what to do, when to do, how to do and who will do a particular task ? Plans are framed to achieve better results. Control is the process of checking whether the plans are being adhered to or not, keeping a record of progress, comparing it with the plans and then taking corrective measures for future if there is any deviation, Every business enterprise needs the use of control techniques for surviving in the highly competitive and chang g economic world. There are various control devices in use. Budgets are the most important tool of profit planning and control. They also act as an instrument of co-ordination. This chapter presents a general view of budgeting, its meaning, objectives, essentials, advantages, limitations, classification and preparation of budgets. An attempt has also been made to explain the concepts of Performance Budgeting and Zero-Base Budgeting. MEANING OF A BUDGET ‘A budget is the monetary or/and quantitative expression of business plans and policies to be pursued in the future period of time. The term budgeting is used for preparing budgets and other peed for planning, co-ordination and control of business enterprise. According to coe od of Terminology, “A budget is a financial and/or quantitative statement prepared prior to a defined Po . Budgeting : Management Contro} Process 7 aining a given objective.” 92 - the purpose of attaining & given objective oe erin tatement of management policy during 5 be pursued during that peri : ison with the results actually achieved.” time, of the policy to “A budget is # Pre~ the words of Crown a + yard for compa i vhich a given period WI L TURE OF BUDGETARY CONTRO! MEANING AND NA rious budgeted figures forthe enterprises for the stermining various perce nape tere he process of determi ihe Stee cal performance for calculating future period and then comparing the budget res etal ess ATE recorded. The comparison variances, if any. First of all budgets are prepared and cD se at dcrepancies and take remedial eet ‘actual figures will enable the managemen’ vo -fpelesiintplannive’a a ao on a i ‘The budgetary control is a continuous process a anning and easures at a proper time. ay nae petnry © sithe'end! ea ation. It provides a method of control too. A budget is a means and budgetary he end. result. ; i na ard, “Budgetary control is oo id According to Brown and Howard, “Budgetary cont) 1S Aching responsibilities, comparing the preparation of budgets, co-ordinating the department 3 ieeece maximum profitability.” actual performance with the budgeted and acting upon results to acl hieve rf Eee ty.’ Wheldon characterises budgetary control as ‘plant n advance of the various functions of a business so that the business as a whole is controlled’. J. Batty defines it as “A system which uses budgets as a means of planning and controlling all aspects of producing and/or selling commodities and services.” Welsch relates budgetary control with-day-to-day control process. According to him, “Budgetary control involves the use of budget and budgetary reports, throughout the period to co-ordinate, evaluate and control day-to-day operations in accordance with the ¥ 1 goals specified by the budget”, Budgetary control is tl a system of controlling costs which includes From the above gi n definitions it is clear that budgetary control involves the following : (a) The objects are set by preparing budgets. (b) The business is divided into various responsibility centres for preparing various budgets. (c) The actual figures are recorded. (d) The budgeted and actual figures are compared for studying priocmang i The budget M studying the performance of different (e) If actual performance is less than the bi q ss than the budgetes Fi edia : a dgeted norms, a remedial action is taken Thus, the three cardinal features of budgetary control are : (®) Planning (ii) Co-ordination, and (iii) Control. BUDGET, BUDGETING AND BUDGETARY CONTROL aie aeaae emcrieran expressed in quantitative term practices of achieving given objectives iieoehtiis Mand: refers (0 the principles, procedures Rowland and William have differentiated ne of a department, etc, whereas Budgeting control embraces all and in addition includ management tool for the business planning s. Budgeting is technique for and the three terms as : “Bud; may be said to be the les the science of pl and control”,! Igets are the individual objectives = act of building budgets. Budgets") lanning the budgets to effect an overall 1. Budgeting for Management Conteol, p. 1. pudgeting : Management Control Process opJECTIVES OF BUDGETARY CONTROL 93 pudgetary control is essential for potic ination. mST policy planning and control 1. It also acts as an instrument of co- The main objectives of budgetary control are as fi o Y ol are as follows 1, To ensure planning for future by settin performance of the enterprise are ame ees budgets. The requiren i nea ents and expected 2. To co-ordinate the activities of different department 3. To operate various cost ce ee Cost centres and departments with efficiency and c 4, Elimination of wastes and increase in profitabilit “_ timinati ofitability 5. To anticipate capital expenditures for future : . To centralise the control system. 7. Correction of deviations from the established standards. 8. Fixation of responsibility of various individuals in the organisation, CHARACTERISTICS OF GOOD BUDGETING 1. A good budgeting system should involve persons at different levels while preparing the budgets. The subordinates should not feel any imposition on them. 2. There should be a proper fixation of authority and responsibility. The delegation of authority should be done in a proper way. 3. The targets of the budgets should be realistic, if the targets. are difficult to be achieved then they will not enthuse the persons concerned. 4. A good system of accounting is also essential to make the budgeting successful 5 | ‘The budgeting system should have a whole-hearted support of the top management. 6. ‘The employees should be imparted budgeting education. There should be meetings and discussions and the targets should be explained to the employees concerned. 7. A proper reporting system should be introduced, the actual results should be promptly reported so that performance appraisal is undertaken. REQUISITIES FOR ‘A SUCCESSFUL BUDGETARY CONTROL SYSTEM For making a budgetary control system successful, following requisites are required + (4) Clarifying objectives. The budgets are used to realise objectives of the business. The objectives must be clearly spelt out so that budgets are properly prepared. In the absence of clear g the budgets will also be unrealistic. 2) Proper Delegation of Authority and Responsibility. Budget preparation at every level of management, Even though budgets are fing from lower levels of management is essential for their su authority and responsibility. and control is done d at top level but involvement of persons " ssitates proper delegation of (3) Proper Communication System. An effective system of communication is required for a successful budgetary control. The flow of information regarding budget ould be quick so that these are implemented. The upward communication will help in knowing the difficulties in implementation of budgets. The performance reports of various levels will help top management in budgetary control. pudgeny* . ey perly educated about the bene the success of this system, Bag of put it should be used as or to _< should be Pre loyees ut their role bout theit TOF, dab Joyees py the empl 94 (4) Budget Education. The emp ting system. They should val may not be taken only aS 8 cont bu cont improve their efficiency fan geting is de wae Budgeting Fi employees. In practice the budgets. are the pation of AIL Employer olveme! ctive participation and ine oT hom RE pudgets are framed should be active Jevels of manageme™! on the basis of their past expetiene: tee pience control system depends upon Upon execution, preparation and exeet Ye ‘al and useful S is. The su for every segment of the business, 1 ST with (5) Part also require the wer f budgetary executed at lo associated with their ve more practic all empl ity in budge! uggestions royees of the organisation y js required to make them suitable under changed circumstances, Even though budgets are prepared by y ‘ain adjustments, may the participation of (6) Flexibility. Flexibil ets are prepared for the alway ‘occurrences later OP considering the future possibili Flexibility will make the budgets more appropriate and real i human beings. Their successful implementation (7) Motivation. Budgets are to be implementa c will depend upon the interest shown by THE EmPTOYeS Ft persons should be motivated to improve their cine 5 {motivation should be introduced for making working so that budgeting is successful. A proper system of this system a success. ESSENTIALS OF There are certain steps which are control system. They are as follows 1. Organisation for Budgetary Control. The jisation i i . proper organisation is essential for the preparation, imkintenance and administration of budgets. A Budgetary Committee is a Comprises the departmental heads of various departments. All i i s : the functional heads are enti . ‘ ; ru responsibility of ensuring proper implementation of their respective departmental budgets. sted wine ‘An organisation chart for budgetary control is give below : BUDGETARY CONTROL necessary for the successful implementation of a budgetary ORGANISATION CHART FOR BUDGETARY CONTROL, (CHIEF EXECUTIVE) v (BUDGET OFFICER) councer Surrey J | { (PRODUCTION t | é (SALES (FIN, | NANCE (ACCOUNTS (PERSONNEL (RESEARCH & MANAGER) MANAGER) Mat NAGER) MANAGER) MANAGER) DEVELOPMENT MANAGER) (a. (PRODUCTION | icTION) [ a, (SALES BUDGET) BUDGET) Aimecetrts BAPLANT UTILI- « anruTILt | | Buabvertise. | |apay BUDGET) (LABOUR| | (RESEARCH & BUDGET) ae BUDGEDS BUDGET) | | DEVELOPMENT| GET) BUDGET) The Chief Executive is the overall inchar; ! eral incha for preparing realistic budgets. Abu = Ol € of budget Her 9 etary system. He constitutes a budget commite® nvener of the budget committee who > yment Contre oot lanagement rol Process 95 ise pugs of illerent departments, The managers of ferent departments are made opie for their departmental budgets Fs Budget manual Budgetcommittee, Budget period, Det ition of key factor. Budget Centres, A budget centre is that part of the organisation for which the budget is prepared. A budget centre may be a department, section of department or any other part of the Apartment. The establishment of budget centres is essential for covering all pa rts of the organisation. ‘The budget centres are also necessary for cost control purposes. The app sal of performance of different parts of the organisation becomes easy when different centres are established. 3, Budget Manual. A budget manual is a document which spells out the duties and the also the ‘bilities of the various executives concerned with the budgets. It specifies the relations among ‘iS Tunctionaries, ‘A budget manual covers the following matters : (i) A budget manual clearly defines the objectives of budgetary control system, It also gives the benefits and principles of this s¥stem. (ii) ‘The duties and responsibilities of various persons dealing with preparation and execution of budgets are also given in a budget manual. It enables the management 1 know of persons dealing with various aspects of budgets and clarify their duties and responsibilities. It gives information about the sanctioning authorities of various budgets. The financial alt oo powers of different managers are given im the manual for enabling the spending of amount “on various expenses ctimects (iv) A proper.table for budgets including the sending of performance reports is drawn so that every work starts in time and a systematic control is exercised. (v) The specimen forms and number of copies to be used for preparing budget reports will also be stated, Budget centres involved should be clearly stated. (vi), The length of various budget periods and control points be clearly given. (vi) The procedure to be followed in the entire system should be clearly stated. (viti) A method of accounting to be used for various expenditures should also be stated in the manual. ‘A budget manual helps in knowing in writing the role of every employee, his duties, responsibilities, the ways of undertaking various tasks etc. it also helps in avoiding ambiguity of any time. 4, Budget Officer. ‘The Chief Executive who is at the top of the organisation, appoints some person as Budget Officer. The budget officer is empowered to scrutinise the budgets prepared by tifferent functional heads and to make changes in them, if the situation “so demands. The actual performance of different departments is-eommunicated to the Budget Officer. He determines the deviations in the budgets and takes necessary steps to rectify the deficiencies, if any. He works as a co- ordinator among different departments and monitors the relevant information. He also_informs the top ame —=— ee Budgeting : Management Contro) Proce, 8g ‘the budget officer will be able tg 96 ents c gifferent departments. eon ere cay ement about the performance of diff Le ‘with the working of all the departments, ny management abot » is conversa eee at is work fully well only Hf he 1 the accountant is made responsible for repay cae concernss ‘ < a ale concer, TT gominttee Known a8 Budget Comite ale © are made membe of this committee. The cOmmitey “ots, The members of this committee put up the ae ake collective decisions, if necessary, Thy 5, Budget Committee. 10 smal cae i el of budgets. In Taree and implementation of ea formed, The heads of all the importa eee is responsible for preparation aan execution of to sr hat respective departments and HIP the cor er acts as co-ordinator of this committee / c iets as co-ordin: J " ‘A budget period length e for which a bi " be different for different industries or even j buudeet period depends upon a number of ete It may be di ver may be different in the same industry oF business. — : i nsiderat« : vet period depends upon the following co! ee e 7 Ge et ie., sales budget, production budget, raw materials purchase budget, 2 wenl xpendite budget A capital expenditure budget may be for a longer period ie, 3 car yea ; purchase, sale budgets may be for one Year (b) ‘The nature of demand for the products. wailability of the finances. 6. Budget Period. (c) The timings for the a\ (d) The economic situation of the cycles. (e) The length of trade cycles. |All the above mentioned factors are taken into account while fixing the period of budgets. 7. Determination of Key Factor. The budgets are prepared for all functional areas. These budgets are iner-dependent and inter-telated. A proper co-ordination among different budgets is necessary for making the budgetary control a success. The constraints on some budgets may have an effect on other budgets too factor which influences all other budgets is known as Key Factor or Principal Factor. ‘There may be a limitation on the gun ot goods a concern may sell. In this case, sales will be a key factor and all other budgets will be prepared by keeping in view the amount of goods the concer will be able to sell. The raw material supply may be limited ; so production, sales and cash budgets will be decided according to raw materials budget. Similarly, plant capacity may be a key factor if the supply of other factors is easily available. peat sy ae the aoe raw material supply may be limited at one Se es a be increased by adding more sales staff, ; prove at different times. They key factor also highlights the limitations of the enterprise. This will enable th i . ie management to improve the i those departments where scope for improvement exists, : aes BUDGETING VS. FORECASTING F i i woes eee plening or budgeting but it cannot be confused with the late. sare on : S or inferences as to what the f ie Fs : at the future may be. age bis ake pedis hil prepaing plans forthe future. According to Hen gh Tare mode gement, ire plan is made up of series of separate plans called forecasts. Forecasting proves pudgeting : ManagementControl Process 97 the difference between budgeting and fore asting can be su at ‘ mmarised as below : |, Forecasts are merely well-educated ve a budget relates 10 planned ev to be pursued in the future, mates or inferences. about nd is the quanti the future probable events tative expression of business plans and where policies 2, Budgeting begins where fore preparing the budgets ting end is for In fact, forecasting provides the logical b 3. A budget provides a standard for comp: important control device for the mana which no control can be exercised, ison with the results actually achieved and, thus, is an Ment, while a forecast represents merely a probable event over ADVANTAGES OF BUDGETARY CONTROL The budgetary control system helps efforts are made for its achievement in fixing the goals for the organisation as a whole and concerted . It enables economies in the enterprise. Some of the advantages of budgetary control are : NUDGETARY CONTROL ADVANTAGES LIMITATIONS MAXIMISATION OF PROFIT UNCERTAIN FUTURE PROPER CO-ORDINATION REVISION REQUIRED PROVIDES SPECIFIC AIMS DISCOURAGES EFFICIENT PERSONS ‘TOOL FOR MEASURING PERFORMANCE PROBLEM OF CO-ORDINATION ECONOMY $,_ CONFLICT AMONG DIFFERENT DEPARTMENTS DEPENTDS UPON SUPPORT OF TOP MANAGEMENT (CREATES BUDGET CONSCIOUNSNESS REDUCED COSTS DETERMINES WEAKNESSES. 10, INTRODUCTION OF INCENTIVE SCHEMES. 1. Maximisation of Profit. The budgetary control aims at the maximisation of profits of the enterprise. To achieve this aim, a proper planning and co-ordination of different functions is undertaken. There is a proper control over various capital and revenue expenditures. The resources are put to the best possible use. 2. Co-rodination. ‘The working of different departments and sectors. is properly co-ordinated. The budgets of different departments have a bearing on one another. The co-ordination of various executives and suboridnates is necessary for achieving budgeted targets. 3. Specific Aims, The plans, policies and goals are decided by the top management. Alll efforts are put together to reach the common goal of the organisation. Every department is given a target to be achieved. The efforts are directed towards achieving some specific aims. If there is no definite aim then the efforts will be wasted in-pursuing—itterent aims. 4. Tool for Measuring Performance. By providing targets to various department. budgetary control Budgeting : Management Control Pro, = ‘The budgeted targets are compared te | managerial pergormance. THe PUIG : 0 ack ‘vides a tool for measuring manager” be Mormance of cach department is reported ty rhe are determined. The Pe ecremt by exception, 35: vp results and deviations jis system oduction_of manag meets oduct h , ables the int _. enabl = involved in the preparation of production budget ‘Two important considerations are (a) What is to be produced 5 y be produced ? ee ene avalves the following stages reparation of production budget i 5 essential for prepa ‘Toe preparation wf pr production planning schedule is essential for preparing pro, 1. Production Planning: A peor Ty be pretuced is determined. The utilisation of optimum, budget. The number of physical units t0 of materials and labour, ete. is considers a smooth production schedule nt of bottlenecks due to shortas ite Jan, Production planning will ensure t The number of units of different products to be a the plant will be able to work throughout the budzetey ty either too high oF too low. A normal pies and avoidance preparing a production 2. Consideration of Plant Capacity. should be determined and the capacity which ? Period should be decided. One should nor fix the capaci capacity which will be a realistic estimate should be budgeted. _ 3. Stock Quantity to be Held. The quantity of finished goods to be ere Should be decided. This quantity will depend upon a number of factors like sales potential. storage facies available and cost of the stock. While fixing production target, the required closing stock figures wil by added to the estimated sales figures and opening stock figures will be deducted from it. The work in Progress will also be taken into account while fixing a production target. 4. Considering Sales Budget. ‘The production budget is fixed with reference to sales budget. The sales budget will provide a guideline for production planning. If both the budgets are not co-ordinated then there may arise problems of either selling the whole stock or of producing it. In case the sales are not undertaken as per schedule then production should be reduced or vice-versa. A production budget may be prepared as given under: Production Budget for the period ending 31st March, 2018 Units ‘Add closing Total Less opening required stock of units stock of forsale Sinished required finished goods ‘goods January February March April May June July August September October ‘November December Total COST OF PRODUCTION BUDGET The production budget determines the number of units to be ce units converted into monetary terms, it becomes a cost of pr produced. When these roduction budget. The cost of production buds udgeting : Management Control Process 9.49 js the total 0 be spent on producing the units si ; el S stipulated in th are broken into elements i. ial, qua 1¢ production bud; q are broken ino lees te ‘material, quantity, labour, time and aac eee cost, s ferheads required for manufacturing are totaled Econ ‘The materials production budget. taled together to make it a cost of A specimen of the cost of production budget is given below : Costof Production Budget Wat vom es Taw anafactaring Dread ems lO at Opera: rade | Hows | Rate ] Total |Depart-| Cot | Total | Co fr | ner |Material| tion | of per | labour | men Cost | per jmaterials mate- | unit | cost labour hou it required | rials | cn mu Disre 6. Prepare a Production Budget for each month and a summarised Production Cost Budget for the six months period ending 31st December, 2017 from the following data of product “X’. (i) The units to be sold for different months are as follows July, 2017 1,100 August 11100 September 1,700 October 1,900 November 2500 December 2300 January 2018 2,000 (ii) There will be no work in progress at the end of any month. (iii) Finished units equal to half the sales for the next month will be in stock at the end of each month (including June, 2017) (iv) Budgeted production and production cost for the year ending 31st December, 2017 are as follows: Production (units) 2,00 Direct materials (per unit) z10 Direct Wages (per unit) wa Total Factory Overheads apportioned to products € 88,000. Solution : (i) Production Budget (for each month from July, 2017 to December, 2017) ‘Month ‘Opening Stock Sales Closing Stock 2000 (units) (Units) (Units) 550 1,100 550 550 1,100 850 1,700 950 Tuly August September 850 October 950 1,900 1,250 November 1,250 2,500 1,150 December 1,150 2,300 1,000 Total 11,050 units Production = Sales + Closing stock - Opening stock August 1s 9 september] 18 » | 2 Is - 921 October 18 Glee 8 » ]) 0 i , aie 7 9 |} m1] | 2% November | 18 9 | 18 ms 10 December 1s 9 Total Note : Opening stock is of finished goods is equal to hal ie ie budgeted sales for the Et same month because ales in the next month, ' closing stock Particulars Product - 235 units oduct 231 units Direct material is . 4.700 2.310 7.010 @%10 @ts @t4 Direct labour 1175 175 ons Works Overheads Total Production Cost Cost per unit 10.105, 2.009 5,980 2.243 MATERIALS BUDGET The material budget is concerned with determining the quantity erials_required_for production. The programme for purchasing raw materials is adjusted according to the production budget. The materials are purchased as per the requirements of production department. The requirements of materials are determined product-wise. The rates of consumption of raw materials are also determined. The number of units to be produced multiplied by the rate of consumption (raw materials required for producing one unit) will give the figure of materials required. The stocks of materials required in hand at any time are added to the materials required for production. The opening stock of materials is deduced from the figures determined as above, In this way, the requirement of materials in units will be determined. The units of materials required multiplied by the rate per unit of raw material will give us a figure of material cost. ‘The raw materials budget will serve the following purposes : 1. The Purchase Department will be able to plan the purchase of raw materials at different times. It will enable the fixation of minimum stock level, maximum stock level and re-ordering v level. 3. The raw materials purchase budget will be determined. 4, The budgeted cost of raw materials will be determined. Illustration 8. The sales director of a manufacturing company reports that next year he expects to sell 40,000 units of a particular product. The production department gives the following figures : Two kinds of raw materials A and B are required for manufacturing the product. Each product requires 3 units of material A and 2 units of material B. Budgeting : Management Control Process 923 DIRECT LABOUR BUDGET The labour required for production may be cl required for manufacturing the product is known as essifed into direct and indirect labour The labour Sith ‘prodiétion is Z 1 as difect labour. The labour whieh cannot be specified coe enion ee Though two budgets may be prepared, direct and indirect rea part of nana ein, Of ie only dest Ihour budget i prepared ecause indirect labour is The labour content of each it . apnea wee is determined in terms of grades of workers required as per production and motion study. The tates of pay. each job, process and operation is determined with the help of time and motion study, Te rates of pay including all allowances are multiplied by labour time for calculating, If piece-rate systems for oe schemes are in operation then labour rates should be suitably increased. ome ‘ving wages is in operatio i ted by multiplyin budgeted units by thé Lbour msec then labour cost will be calculated by multiplying , Lacerda is useful for anticipating labour time required for production. The personnel jepartment is also able to make arrangements for recruitment of workers, etc. Ilustration 10. The direct labour hour requirements of three of the products manufactured in factory, each involving more than one labour operation, are estimated as follows : Direct labour hours per units (In minutes) Products 1 2 3 ‘Operation T 1S a 30 Operation 2 5 12 24 Operation 3 9 6 a 6 days in a week. The budget quarter is taken as 13 weeks The factory worked 8 hours per day, idays and other causes are estimated to be 124 hours. and during a quarter, lost hours due to leave and holic The budgeted hourly rates for the workers manning the operation 1, 2 and 3 are % 2,00 ; € 2.50 and & 3.00 respectively. The budgeted sales for the products during the quarter are : Product 1 9,000 units Product 2 a 15,000 units 12,000 units Product 3 000 Units of Product 2 and 4,000 units of product 3 and it is proposed There is a carryover of 5, the budget quarter as follows : to build up a stock at the end of 1,000 units Product 1 Product 3 2,000 units Prepare a man-power budget for the quarter showing for each operation, (i) direct labour hours, (ii) direct labour cost, and (iii) the number of workers. Budgeting : Management Control Process Product 2 Operation 1 ion 2 Product 3 Operation 1 Operation 2 (8) Number of Men Required Number of Men Req Operation 1 Operation 2 Operation3 9.25 =7,000 hours x 2=2 14,000 2,000 hours x 2.50=% 5,000 1,000 hours x2 3.00 =% 3,000 000 hours x¥ 2,00= 10,000 4,000 hours x% 2,50= 10,000 Direct labour hours required Total available hours per man 15,000, = 30 men sy = 30m 6,000 ~ 12 , 3000 2, any = 5 men MANUFACTURING OVERHEADS COST BUDGET The manufacturing overheads cost is that part of works cost which arises indirect materials, overheads and other factory expenses. manufacturing cost i material and direct labour. Manufacturing overheads cost may be classified into fariable cost. and semi~ “The fixed works overheads cost remains constant irrespective of output of past experience. The Variable works overhead cost is determined per uni by multiplying the rate per unit by the budgeted output. The semi in output but the rate per unit decreases with the increase itt output. cost, management must consider the level of activity to be attained i accurately. Iustration 11. From the information given below, the quarter ending December 31, 2017 + Budget output during the quarter Fixedoverheads from indirect labour, is excluded from direct fixed cost, variable cost and it is estimated on the basis it of cost and it is calculated j-variable cost increases with the increase While budgeting manufacturing overheads in future so that the expenses are estimated prepare a manufacturing overhead budget for + 5,000 units : 30,000 15,000 Variable Overheads (varying at the rate of € 5 per unit) ‘Semi-Variable Overheads (40% fixed and 60%varying @ @ 3 per unit) Solution = ‘Manufacturing Overheads Budget for the quarter ending Dec. 31, 2017 Fixed overheads Variable Overheads (5,000 x 5) Semi-Variable Overheads: Fixed (40%) Variable (@ € 3 per unit) ‘Total Overheads Cost Bayon seeeeererron Cantar = D BUDGET AND DISTRIBUTION OVERHEA) oy SELLING sing to sling, advertising sd station all expense cording 10 ‘This budget includes alysed expenses may be ji ee ay be timated om THE dis will vary with the executives of sales dept budget lies with the executives eee " proportion to expected sales figures. THE fre ; policies, research programmes and nature cof these expen distribution overhead budget. You are required to pI richets, teritorics, salesmen, ete. The fixed expen 2M Ny, asis of past experience and anticipated changes. Variable tad Pe eed safes figures. THE responsibility fo ply mines The volume of tHESe expenses shoul eee expectations, estimated by the ma agement es ises will influence the preparation of “ is img aistribution overheat Mustration 12. repare a Sales Overhead Budget from the estimates rf s 7

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