FINANCIAL PLANNING

AND BUDGETING
PRESENTED BY: GROUP 3
LESSON PREVIEW/REVIEW
Introduction
 How do you, how do you differentiate product and period costs?
 Where does the preparation of the Overhead budget relevant to?
 How about the Selling and administrative expenses budget? What makes you say so?
Overhead budget

shows the expected cost of all production costs other than direct materials and direct labor
 many companies use direct labor hours as the driver for overhead
 Cost that vary with direct labor hours are pooled and called variable overhead;
 Remaining overhead items are pooled into fixed overhead

Selling and administrative expenses budget

 outlines planned expenditures for nonmanufacturing activities
 can be broken down into fixed and variable components
The following formats are relevant to the computation of the budgets
mentioned aboved.

Company Name Company Name

Direct Labor Budget Overhead budget
For the period ended For the period ended

Units to be produced XX Budgeted direct labor hours XX

Direct labor time per unit hours *X
Variable overhead rate *PXX
Total hours needed XXX
Budgeted variable overhead rate PXX
Average wage per hour PXX
Total direct labor cost PXXX Budgeted fixed overhead PXX
Total overhead PXXX
 Company Name
Selling and Administrative Expense Budget
For the period ended

Planned sales in units XX

Variable selling and administrative *PXX
expenses per unit PXX
Total selling and administrative expenses
Salaries PXX
Utilities PXX
Advertising PXX
Depreciation PXX
Total Fixed Expenses PXX

Total Selling and Administrative Expense Budget PXXX

FAQ
1. What are common examples of overhead?
 Example of fixed overheads include salaries, rent, property taxes, depreciation of
assets, and government licences.
 Examples of variable overheads include shipping cost, office supplies, advertising
and marketing costs, consultancy service charges, legal expenses, as well as
maintenance and repair of equipment.