5.

Labor Budget:
• Identifies the labor needs for a future
period and the labor costs associated with
those needs. For hours can be determined
as soon as the sit production budget has
been set. Multiplying for hours needed per
unit by the anticipated units of production
gives the labor hour requirements for the
budget period these labor hours, when
multiplied by the various hourly labor
rates, yield the labor dollar budget.
 Example:

• If you know that the unit of production in

Z Company needs 2 hours. The rate per
hour is 10L.E. required: prepare the labor
budget.
 Quantity of
Product production Hours / unit Rate / hour Direct wage
A 1100 2 10 22000

B 700 2 10 14000

C 1600 2 10 32000

Total 68000
Exercise (4):
ABC chemical company has estimated that production for the next
five quarters will be:
Quantity of production
Quarter 1.2003 46.000 Units
Quarter 2.2003 42.000 Units
Quarter 3.2003 50.000 Units
Quarter 4.2003 39.000 Units
Quarter 1.2004 48.000 Units

the production takes 2.5 hours of direct labor to produce each finished unit
of product. Direct labor costs are 20 L.E. per hour..
• Required:
Prepare quarterly direct labor budget for ABC Company
Manufacturing overhead budget:

• Is a detailed shekel of anticipated

manufacture costs, other than direct
materials and direction labor costs that
must be incurred to meet the production
expectations of a future period.
 Items parts Total
Variable cost
Fuel X
Power X
Indirect labor X
Maintenance x
Total variable
cost xx
Fixed cost X
Insurance X
Supervision cost X
Depreciation X
Maintenance x
Indirect labor
Total fixed cost xx
Total cost xxx
• Example (6):
If you know that the overhead cost was:
Depreciation 10000 Fuel 5000
Power 12000
• Required: Prepare the manufacturing
overhead budget.
7. Marketing and Administration
expense budget:
Shows the planned amounts of expenditures
selling, general and administrative
expenses during the budget period. This
budget lists the expenses of administering
the firm and selling its product. The
general and administrative expense
budget also serves as a means of
controlling these costs. Many elements of
this budget are fixed costs.
Note: example of items to be included in this
budget:
Supplies - Travel cost – Administrative cost.
Administrative Budget

Item Cost

Supplies 15000

Travel cost 15000

Administrative Cost 30000

Total 60000
Marketing Budget:
Note: Sales commission – Advertising –
Sales salaries – Package.

Marketing Budget

Item Parts Total

Sales & allows 20000

Advertising 10000

Package 30000

33000