WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant

Operating Budget Example

Pro Forma Income Statement
Tax rate (%):
Net sales
Cost of goods sold
Gross profit

35.0%
$ 15,946,821 From the Sales Budget
(11,267,373) From the Cost Of Goods Sold Budget
4,679,448 Net sales - Cost of goods sold

Operating expenses
Operating profit (EBIT)

(2,827,586) From the SG&A Budget

1,851,862 Gross profit - Operating expenses

Interest income
Interest expense
Tax
Net profit

951 From interest bearing investments

(44,083) From short and long-term borrowings used to finance operations
(633,056) Based on the percentage entered above
$

1,175,675 Amount available after all expenses have been paid

Ratios
Profit margin

7.4% Net profit / Net sales

Gross margin

29.3% Gross profit / Net sales

Times interest earned

42.01 Operating profit / Interest expense. This ratio gauges the organization's ability to meet its debt obligations

Degree of financial leverage

1.02

Degree of operating leverage

2.47

$1,600,000

Components of Operating Income

$1,400,000

$1,200,000

$1,000,000

DM
$800,000

DL
OH
SGA

$600,000

$400,000

$200,000

$0

SALES

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Operating Budget Example

Unit Sales Budget
Percentage of sales
assumed to be uncollectible

7.5%
2

Item
Item1
Item2
Item3
Item4
Item5

Total
14,790
12,853
24,311
12,395
31,021

Jan-2011

Feb-2011

1,205
1,057
2,104
1,010
2,329

Mar-2011

1,210
1,059
2,090
1,014
2,373

Apr-2011

1,215
1,062
2,075
1,018
2,417

May-2011

1,220
1,064
2,061
1,022
2,463

Jun-2011

1,225
1,067
2,047
1,027
2,509

Jul-2011

1,230
1,070
2,032
1,031
2,556

Aug-2011

1,235
1,072
2,018
1,035
2,604

Sep-2011

1,240
1,075
2,004
1,039
2,653

Oct-2011

1,245
1,078
1,991
1,043
2,702

Nov-2011

1,250
1,080
1,977
1,048
2,753

Dec-2011

1,255
1,083
1,963
1,052
2,805

Jan-2012

1,260
1,086
1,949
1,056
2,857

1,265
1,089
1,936
1,060
2,911

Feb-2012

Two extra periods included as a reference for the "Production/Direct Materials Budget"

1,270
1,092
1,923
1,064
2,965

Dollar Sales Budget

Jan-2011

Sales Price
168.00
289.00
170.00
282.00
110.00
Gross sales
Uncollectible portion
Net sales

Item
Item1
Item2
Item3
Item4
Item5

Total
$ 2,484,720
3,714,517
4,132,870
3,495,390
3,412,310
17,239,807
1,292,986
$15,946,821

202,440
305,473
357,680
284,820
256,190
1,406,603
105,495
$ 1,301,108

Feb-2011
$

203,280
306,051
355,300
285,948
261,030
1,411,609
105,871
$ 1,305,738

Mar-2011
$

204,120
306,918
352,750
287,076
265,870
1,416,734
106,255
$ 1,310,479

Apr-2011
$

204,960
307,496
350,370
288,204
270,930
1,421,960
106,647
$ 1,315,313

May-2011
$

205,800
308,363
347,990
289,614
275,990
1,427,757
107,082
$ 1,320,675

Jun-2011
$

206,640
309,230
345,440
290,742
281,160
1,433,212
107,491
$ 1,325,721

Jul-2011
$

207,480
309,808
343,060
291,870
286,440
1,438,658
107,899
$ 1,330,759

Aug-2011
$

208,320
310,675
340,680
292,998
291,830
1,444,503
108,338
$ 1,336,165

Sep-2011
$

209,160
311,542
338,470
294,126
297,220
1,450,518
108,789
$ 1,341,729

Oct-2011
$

210,000
312,120
336,090
295,536
302,830
1,456,576
109,243
$ 1,347,333

Nov-2011
$

210,840
312,987
333,710
296,664
308,550
1,462,751
109,706
$ 1,353,045

Dec-2011
$

211,680
313,854
331,330
297,792
314,270
1,468,926
110,169 Based on the percentage entered above
$ 1,358,757

Notes:
1 In this example sales prices are expected to remain level throughout the budget period. If they are expected to change, a weighted-average can be used.
2 Totals only include the first 12 periods.

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7/23/20136:33 AM

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Operating Budget Example

Production Budget
% of next month's sales in
ending inventory:

35%

1
2

Item
Item1
Budgeted unit sales
Plus ending inventory
(Less) beginning inventory
Units to be produced

Jan-2011 Feb-2011 Mar-2011 Apr-2011 May-2011 Jun-2011 Jul-2011 Aug-2011 Sep-2011 Oct-2011 Nov-2011 Dec-2011 Jan-2012 Extra period included as a reference for the Direct Materials Budget

Total

14,811

1,205
424
(422)
1,207

1,210
425
(424)
1,211

1,215
427
(425)
1,217

1,220
429
(427)
1,222

1,225
431
(429)
1,227

1,230
432
(431)
1,231

1,235
434
(432)
1,237

1,240
436
(434)
1,242

1,245
438
(436)
1,247

1,250
439
(438)
1,251

1,255
441
(439)
1,257

1,260
443
(441)
1,262

1,265 From the Sales Budget

445 Based on the percentage entered above
(443) Same as previous months ending inventory
1,267

12,864

1,057
371
(370)
1,058

1,059
372
(371)
1,060

1,062
372
(372)
1,062

1,064
373
(372)
1,065

1,067
375
(373)
1,069

1,070
375
(375)
1,070

1,072
376
(375)
1,073

1,075
377
(376)
1,076

1,078
378
(377)
1,079

1,080
379
(378)
1,081

1,083
380
(379)
1,084

1,086
381
(380)
1,087

1,089
382
(381)
1,090

24,253

2,104
732
(736)
2,100

2,090
726
(732)
2,084

2,075
721
(726)
2,070

2,061
716
(721)
2,056

2,047
711
(716)
2,042

2,032
706
(711)
2,027

2,018
701
(706)
2,013

2,004
697
(701)
2,000

1,991
692
(697)
1,986

1,977
687
(692)
1,972

1,963
682
(687)
1,958

1,949
678
(682)
1,945

1,936
673
(678)
1,931

12,412

1,010
355
(354)
1,011

1,014
356
(355)
1,015

1,018
358
(356)
1,020

1,022
359
(358)
1,023

1,027
361
(359)
1,029

1,031
362
(361)
1,032

1,035
364
(362)
1,037

1,039
365
(364)
1,040

1,043
367
(365)
1,045

1,048
368
(367)
1,049

1,052
370
(368)
1,054

1,056
371
(370)
1,057

1,060
372
(371)
1,061

31,225

2,329
831
(815)
2,345

2,373
846
(831)
2,388

2,417
862
(846)
2,433

2,463
878
(862)
2,479

2,509
895
(878)
2,526

2,556
911
(895)
2,572

2,604
929
(911)
2,622

2,653
946
(929)
2,670

2,702
964
(946)
2,720

2,753
982
(964)
2,771

2,805
1,000
(982)
2,823

2,857
1,019
(1,000)
2,876

2,911
1,038
(1,019)
2,930

Item2
Budgeted unit sales
Plus ending inventory
(Less) beginning inventory
Units to be produced
Item3
Budgeted unit sales
Plus ending inventory
(Less) beginning inventory
Units to be produced
Item4
Budgeted unit sales
Plus ending inventory
(Less) beginning inventory
Units to be produced
Item5
Budgeted unit sales
Plus ending inventory
(Less) beginning inventory
Units to be produced

Notes:
1 The percentage of the following month's sales, in units, the organization wants to have in inventory.
2 Totals only include the first 12 periods.

\\vboxsrv\conversion_tmp\scratch_4\159576795.xlsx.ms_office

Page 3 of 10

7/23/20136:33 AM

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Operating Budget Example

Bill(s) of Materials

Item
Item1

Item
Item4

Direct
Material Quantity
DM9
3
DM10
6

Direct Material
Cost/Unit
5.18
1.67
Total material cost

Extended
Cost
$ 15.54
10.02
$ 25.56

Direct
Material Quantity
DM5
3
DM1
10
DM2
6
DM8
1

Direct Material
Cost/Unit
4.75
2.16
6.74
7.44
Total material cost

Extended
Cost
$ 14.25
21.60
40.44
7.44
$ 83.73

Notes:
1 This information will be used in the composition of the Direct Materials Budget.

Item
Item2

Item
Item5

Direct
Material Quantity
DM4
8
DM9
1
DM5
3
DM3
6

Direct Material
Cost/Unit
8.99
5.18
4.75
6.74
Total material cost

Extended
Cost
$ 71.92
5.18
14.25
40.44
$ 131.79

Direct
Material Quantity
DM8
2
DM10
9

Direct Material
Cost/Unit
7.44
1.67
Total material cost

Extended
Cost
$ 14.88
15.03
$ 29.91

Item
Item3

Direct
Material Quantity
DM7
3
DM5
9

Direct Material
Cost/Unit
1.28
4.75
Total material cost
$

Extended
Cost
$ 3.84
42.75
$ 46.59

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009 -2011

Operating Budget Example

Direct Materials Budget Detail
% of next month's production
in ending inventory:

25%

Jan-2011
Item
Item1
DM units needed for production
Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM

DM9

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

Mar-2011

Apr-2011

May-2011

Jun-2011

Jul-2011

Aug-2011 Sep-2011

Oct-2011

Nov-2011

Dec-2011

44,478
5.18
230,396

3,621
3,633
3,651
3,666
3,681
3,693
3,711
3,726
3,741
3,753
3,771
908
913
917
920
923
928
932
935
938
943
947
(905)
(908)
(913)
(917)
(920)
(923)
(928)
(932)
(935)
(938)
(943)
3,624
3,638
3,655
3,669
3,684
3,698
3,715
3,729
3,744
3,758
3,775
5.18
5.18
5.18
5.18
5.18
5.18
5.18
5.18
5.18
5.18
5.18
$ 18,772 $ 18,845 $ 18,933 $ 19,005 $ 19,083 $ 19,156 $ 19,244 $ 19,316 $ 19,394 $ 19,466 $ 19,555 $

3,786
950
(947)
3,789
5.18
19,627

88,956
1.67
148,557

7,242
7,266
7,302
7,332
7,362
7,386
7,422
7,452
7,482
7,506
7,542
1,817
1,826
1,833
1,841
1,847
1,856
1,863
1,871
1,877
1,886
1,893
(1,811)
(1,817)
(1,826)
(1,833)
(1,841)
(1,847)
(1,856)
(1,863)
(1,871)
(1,877)
(1,886)
7,248
7,275
7,309
7,340
7,368
7,395
7,429
7,460
7,488
7,515
7,549
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
$ 12,104 $ 12,149 $ 12,206 $ 12,258 $ 12,305 $ 12,350 $ 12,406 $ 12,458 $ 12,505 $ 12,550 $ 12,607 $

7,572
1,901
(1,893)
7,580
1.67
12,659

378,953

$ 30,876

32,286

102,976
8.99
925,754

8,464
8,480
8,496
8,520
8,552
8,560
8,584
8,608
8,632
8,648
8,672
2,120
2,124
2,130
2,138
2,140
2,146
2,152
2,158
2,162
2,168
2,174
(2,116)
(2,120)
(2,124)
(2,130)
(2,138)
(2,140)
(2,146)
(2,152)
(2,158)
(2,162)
(2,168)
8,468
8,484
8,502
8,528
8,554
8,566
8,590
8,614
8,636
8,654
8,678
8.99
8.99
8.99
8.99
8.99
8.99
8.99
8.99
8.99
8.99
8.99
$ 76,127 $ 76,271 $ 76,433 $ 76,667 $ 76,900 $ 77,008 $ 77,224 $ 77,440 $ 77,638 $ 77,799 $ 78,015 $

12,872
5.18
66,677

DM10

Total DM cost for Item1

Feb-2011

Total

DM9

$ 30,994

$ 31,139

$ 31,263

$ 31,388

$ 31,505

$ 31,650

$ 31,774

$ 31,899

$ 32,016

$ 32,161

Units to be produced from the Production Budget * the quantity in the bill of material
Based on the percentage entered above
Same as previous months ending inventory
A negligible amount of lead/delivery time is assumed. However, this must be taken into consideration to avoid shortages
From the bill of material
Total cost of direct materials for this finished good

Item2
DM units needed for production
Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM4

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM9

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM5

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM3

Total DM cost for Item2

1,084
272
(271)
1,085
5.18
5,620 $

1,087
273
(272)
1,088
5.18
5,636

37,798
4.75
179,541

3,174
3,180
3,186
3,195
3,207
3,210
3,219
3,228
3,237
3,243
3,252
795
797
799
802
803
805
807
809
811
813
815
(794)
(795)
(797)
(799)
(802)
(803)
(805)
(807)
(809)
(811)
(813)
3,175
3,182
3,188
3,198
3,208
3,212
3,221
3,230
3,239
3,245
3,254
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
$ 15,081 $ 15,115 $ 15,143 $ 15,191 $ 15,238 $ 15,257 $ 15,300 $ 15,343 $ 15,385 $ 15,414 $ 15,457 $

3,261
(815)
2,446
4.75
11,619

75,597
6.74
509,524

6,348
6,360
6,372
6,390
6,414
6,420
6,438
6,456
6,474
6,486
6,504
1,590
1,593
1,598
1,604
1,605
1,610
1,614
1,619
1,622
1,626
1,631
(1,587)
(1,590)
(1,593)
(1,598)
(1,604)
(1,605)
(1,610)
(1,614)
(1,619)
(1,622)
(1,626)
6,351
6,363
6,377
6,396
6,415
6,425
6,442
6,461
6,477
6,490
6,509
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
$ 42,806 $ 42,887 $ 42,981 $ 43,109 $ 43,237 $ 43,305 $ 43,419 $ 43,547 $ 43,655 $ 43,743 $ 43,871 $

6,522
(1,631)
4,891
6.74
32,965

1,681,495

1,058
265
(265)
1,058
5.18
5,480 $

$139,495

1,060
266
(265)
1,061
5.18
5,496 $

$139,768

1,062
266
(266)
1,062
5.18
5,501 $

$140,058

1,065
267
(266)
1,066
5.18
5,522 $

$140,488

1,069
268
(267)
1,070
5.18
5,543 $

$140,918

1,070
268
(268)
1,070
5.18
5,543 $

$141,112

1,073
269
(268)
1,074
5.18
5,563 $

$141,506

1,076
270
(269)
1,077
5.18
5,579 $

$141,908

1,079
270
(270)
1,079
5.18
5,589 $

$142,267

1,081
271
(270)
1,082
5.18
5,605 $

8,696
2,180
(2,174)
8,702
8.99
78,231

$142,561

$142,963

$ 128,451

Item3
DM units needed for production
Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM7

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM5

Total DM cost for Item3

6,300
6,252
6,210
6,168
6,126
6,081
6,039
6,000
5,958
5,916
5,874
1,563
1,553
1,542
1,532
1,520
1,510
1,500
1,490
1,479
1,469
1,459
(1,575)
(1,563)
(1,553)
(1,542)
(1,532)
(1,520)
(1,510)
(1,500)
(1,490)
(1,479)
(1,469)
6,288
6,242
6,199
6,158
6,114
6,071
6,029
5,990
5,947
5,906
5,864
1.28
1.28
1.28
1.29
1.29
1.29
1.30
1.30
1.30
1.31
1.31
$ 8,049 $ 7,990 $ 7,935 $ 7,961 $ 7,904 $ 7,849 $ 7,855 $ 7,804 $ 7,748 $ 7,755 $ 7,699 $

5,835
1,448
(1,459)
5,824
1.31
7,647
17,505
4,345
(4,376)
17,474
4.75
83,002

72,632
1.28
94,196

217,897
4.75
1,035,011

18,900
4,689
(4,725)
18,864
4.75
$ 89,604 $

1,129,207

$ 97,653

18,756
4,658
(4,689)
18,725
4.75
88,944 $

$ 96,934

18,630
4,626
(4,658)
18,598
4.75
88,341 $

$ 96,275

18,504
4,595
(4,626)
18,473
4.75
87,747 $

$ 95,708

18,378
4,561
(4,595)
18,344
4.75
87,134 $

$ 95,038

18,243
4,529
(4,561)
18,211
4.75
86,502 $

$ 94,351

18,117
4,500
(4,529)
18,088
4.75
85,918 $

$ 93,773

18,000
4,469
(4,500)
17,969
4.75
85,353 $

$ 93,157

17,874
4,437
(4,469)
17,842
4.75
84,750 $

$ 92,498

17,748
4,406
(4,437)
17,717
4.75
84,156 $

$ 91,910

17,622
4,376
(4,406)
17,592
4.75
83,562 $

$ 91,261

90,648

Item4
DM units needed for production
Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM5

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM1

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM2

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM8

Total DM cost for Item4

37,274
4.75
177,052

3,033
3,045
3,060
3,069
3,087
3,096
3,111
3,120
3,135
3,147
3,162
761
765
767
772
774
778
780
784
787
791
793
(758)
(761)
(765)
(767)
(772)
(774)
(778)
(780)
(784)
(787)
(791)
3,036
3,049
3,062
3,074
3,089
3,100
3,113
3,124
3,138
3,151
3,164
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
4.75
$ 14,421 $ 14,483 $ 14,545 $ 14,602 $ 14,673 $ 14,725 $ 14,787 $ 14,839 $ 14,906 $ 14,967 $ 15,029 $

3,171
796
(793)
3,174
4.75
15,077

124,245
2.16
268,369

10,110
2,538
(2,528)
10,120
2.16
$ 21,859 $

10,540
2,643
(2,635)
10,548
2.16
22,784 $

10,570
2,653
(2,643)
10,580
2.16
22,853

74,547
6.74
502,447

6,066
6,090
6,120
6,138
6,174
6,192
6,222
6,240
6,270
6,294
6,324
1,523
1,530
1,535
1,544
1,548
1,556
1,560
1,568
1,574
1,581
1,586
(1,517)
(1,523)
(1,530)
(1,535)
(1,544)
(1,548)
(1,556)
(1,560)
(1,568)
(1,574)
(1,581)
6,072
6,097
6,125
6,147
6,178
6,200
6,226
6,248
6,276
6,301
6,329
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
6.74
$ 40,925 $ 41,094 $ 41,283 $ 41,431 $ 41,640 $ 41,788 $ 41,963 $ 42,112 $ 42,300 $ 42,469 $ 42,657 $

6,342
1,592
(1,586)
6,348
6.74
42,786

12,424
7.44
92,435

1,040,302

1,011
254
(253)
1,012
7.44
7,529 $

$ 84,735

10,150
2,550
(2,538)
10,162
2.16
21,950 $

1,015
255
(254)
1,016
7.44
7,559 $

$ 85,085

10,200
2,558
(2,550)
10,208
2.16
22,049 $

1,020
256
(255)
1,021
7.44
7,596 $

$ 85,473

10,230
2,573
(2,558)
10,245
2.16
22,129 $

1,023
257
(256)
1,024
7.44
7,619 $

$ 85,780

10,290
2,580
(2,573)
10,297
2.16
22,242 $

1,029
258
(257)
1,030
7.44
7,663 $

$ 86,217

10,320
2,593
(2,580)
10,333
2.16
22,319 $

1,032
259
(258)
1,033
7.44
7,686 $

$ 86,518

10,370
2,600
(2,593)
10,377
2.16
22,414 $

1,037
260
(259)
1,038
7.44
7,723 $

$ 86,887

10,400
2,613
(2,600)
10,413
2.16
22,492 $

1,040
261
(260)
1,041
7.44
7,745 $

$ 87,188

10,450
2,623
(2,613)
10,460
2.16
22,594 $

1,045
262
(261)
1,046
7.44
7,782 $

$ 87,582

10,490
2,635
(2,623)
10,502
2.16
22,684 $

1,049
264
(262)
1,051
7.44
7,819 $

$ 87,940

1,054
264
(264)
1,054
7.44
7,842 $

$ 88,312

1,057
265
(264)
1,058
7.44
7,872
88,586

Item5
DM units needed for production
Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM8

DM units needed for production

Plus ending inventory
(Less) beginning inventory
Units to be purchased
DM cost/unit
Total

DM10

Total DM cost for Item5

62,742
7.44
466,800

4,690
4,776
4,866
4,958
5,052
5,144
5,244
5,340
5,440
5,542
5,646
1,194
1,217
1,240
1,263
1,286
1,311
1,335
1,360
1,386
1,412
1,438
(1,173)
(1,194)
(1,217)
(1,240)
(1,263)
(1,286)
(1,311)
(1,335)
(1,360)
(1,386)
(1,412)
4,711
4,799
4,889
4,981
5,075
5,169
5,268
5,365
5,466
5,568
5,672
7.44
7.44
7.44
7.44
7.44
7.44
7.44
7.44
7.44
7.44
7.44
$ 35,050 $ 35,705 $ 36,374 $ 37,059 $ 37,758 $ 38,457 $ 39,194 $ 39,916 $ 40,667 $ 41,426 $ 42,200 $

5,752
1,465
(1,438)
5,779
7.44
42,996

282,342
1.67
471,511

21,105
5,373
(5,276)
21,202
1.67
$ 35,407 $

25,884
6,593
(6,471)
26,006
1.67
43,430

938,312

$ 70,457

21,492
5,474
(5,373)
21,593
1.67
36,060 $

$ 71,765

21,897
5,578
(5,474)
22,001
1.67
36,742 $

$ 73,116

22,311
5,684
(5,578)
22,417
1.67
37,436 $

$ 74,495

22,734
5,787
(5,684)
22,837
1.67
38,138 $

$ 75,896

23,148
5,900
(5,787)
23,261
1.67
38,846 $

$ 77,303

23,598
6,008
(5,900)
23,706
1.67
39,589 $

$ 78,783

24,030
6,120
(6,008)
24,142
1.67
40,317 $

$ 80,233

24,480
6,235
(6,120)
24,595
1.67
41,074 $

$ 81,741

24,939
6,352
(6,235)
25,056
1.67
41,844 $

$ 83,269

25,407
6,471
(6,352)
25,526
1.67
42,628 $

$ 84,828

86,426

Direct Materials Budget Summary

Sum of Amount Month-Year
Right click inside report and select "Refresh" to update if changes have been made above.
DM
Jan-2010 Feb-2010 Mar-2010 Apr-2010 May-2010 Jun-2010 Jul-2010 Aug-2010 Sep-2010 Oct-2010 Nov-2010 Dec-2010 Grand Total
DM1 $
21,859 $ 21,950 $ 22,049 $ 22,129 $ 22,242 $ 22,319 $ 22,414 $ 22,492 $ 22,594 $ 22,684 $ 22,784 $ 22,853 $ 268,369
DM10
47,512
48,210
48,948
49,694
50,442
51,196
51,995
52,775
53,579
54,394
55,235
56,089
620,068
DM2
40,925
41,094
41,283
41,431
41,640
41,788
41,963
42,112
42,300
42,469
42,657
42,786
502,447
DM3
42,806
42,887
42,981
43,109
43,237
43,305
43,419
43,547
43,655
43,743
43,871
32,965
509,524
DM4
76,127
76,271
76,433
76,667
76,900
77,008
77,224
77,440
77,638
77,799
78,015
78,231
925,754
DM5
119,106
118,541
118,028
117,539
117,045
116,484
116,005
115,534
115,040
114,537
114,048
109,697
1,391,603
DM7
8,049
7,990
7,935
7,961
7,904
7,849
7,855
7,804
7,748
7,755
7,699
7,647
94,196
DM8
42,579
43,264
43,970
44,677
45,421
46,143
46,917
47,661
48,449
49,245
50,041
50,867
559,235
DM9
24,253
24,341
24,434
24,527
24,626
24,698
24,807
24,895
24,983
25,071
25,175
25,263
297,073
Grand Total $
423,216 $424,546 $426,061 $427,734 $429,457 $430,790 $432,600 $434,260 $435,986 $437,697 $439,525 $426,397 $ 5,168,268

Notes:
1 In this example DM prices are expected to remain level throughout the budget period. If they are expected to change, a weighted-average can be used.
2 The percentage of the following month's production needs, in units, the organization wants to have in inventory.

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WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Operating Budget Example

Direct Labor Hours Per Unit
Item
Item1

1
Hours
2.9

Direct Labor Direct Labor

Rate/Hour
Cost/Unit
$
13.93 $
40.40

Item
Item2

Hours
1.4

Direct Labor Direct Labor

Rate/Hour
Cost/Unit
$
16.36 $
22.90

Item
Item4

Hours
3.0

Direct Labor Direct Labor

Rate/Hour
Cost/Unit
$
16.13 $
48.39

Item
Item5

Hours
2.1

Direct Labor Direct Labor

Rate/Hour
Cost/Unit
$
13.24 $
27.80

Item
Item1

Total

Item
Item3

Hours
2.9

Direct Labor Direct Labor

Rate/Hour
Cost/Unit
$
12.63 $
36.63

Direct Labor Budget Detail

Jan-2011

DL hours needed for production

DL cost/hr
Total DL cost for Item1

Feb-2011

Mar-2011

Apr-2011

May-2011

Jun-2011

Jul-2011

Aug-2011

Sep-2011

Oct-2011

Nov-2011

Dec-2011

$ 598,320

3,500
13.93
48,759

3,512
13.93
48,921

3,529
13.93
$ 49,163

3,544
13.93
$ 49,365

3,558
13.93
$ 49,567

3,570
13.93
49,729

3,587
13.93
49,971

3,602
13.93
$ 50,173

3,616
13.93
$ 50,375

3,628
13.93
$ 50,537

3,645
13.93
50,779

3,660
13.93
50,981

$ 294,637

1,481
16.36
24,232

1,484
16.36
24,278

1,487
16.36
$ 24,324

1,491
16.36
$ 24,393

1,497
16.36
$ 24,484

1,498
16.36
24,507

1,502
16.36
24,576

1,506
16.36
$ 24,645

1,511
16.36
$ 24,713

1,513
16.36
$ 24,759

1,518
16.36
24,828

1,522
16.36
24,897

$ 888,315

6,090
12.63
76,917

6,044
12.63
76,331

6,003
12.63
$ 75,818

5,962
12.63
$ 75,305

5,922
12.63
$ 74,792

5,878
12.63
74,243

5,838
12.63
73,730

5,800
12.63
$ 73,254

5,759
12.63
$ 72,741

5,719
12.63
$ 72,228

5,678
12.63
71,716

5,641
12.63
71,240

$ 600,617

3,033
16.13
48,922

3,045
16.13
49,116

3,060
16.13
$ 49,358

3,069
16.13
$ 49,503

3,087
16.13
$ 49,793

3,096
16.13
49,938

3,111
16.13
50,180

3,120
16.13
$ 50,326

3,135
16.13
$ 50,568

3,147
16.13
$ 50,761

3,162
16.13
51,003

3,171
16.13
51,148

DL hours needed for production

DL cost/hr
Total DL cost for Item5

$ 868,180

4,925
13.24
65,200

5,015
13.24
66,396

5,109
13.24
$ 67,647

5,206
13.24
$ 68,926

5,305
13.24
$ 70,233

5,401
13.24
71,512

5,506
13.24
72,902

5,607
13.24
$ 74,237

5,712
13.24
$ 75,627

5,819
13.24
$ 77,045

5,928
13.24
78,491

6,040
13.24
79,964

Total DL Hours
Grand total

234,104
$ 3,250,068

19,029
264,031

19,099
265,041

19,188
$ 266,310

19,272
$ 267,492

19,368
$ 268,870

19,443
269,929

19,544
271,360

19,635
$ 272,634

19,733
$ 274,024

19,826
$ 275,330

19,931
276,816

20,033
278,230

13.88

13.88

13.88

13.88

13.89

Hours * Units to be produced from the Production Budget

Item2
DL hours needed for production
DL cost/hr
Total DL cost for Item2
Item3
DL hours needed for production
DL cost/hr
Total DL cost for Item3
Item4
DL hours needed for production
DL cost/hr
Total DL cost for Item4
Item5

Average DL rate/hr

13.88

13.88

13.88

13.88

13.89

13.89

13.89 Grand Total / Total DL Hours

Notes:
1 The average expected hours of direct labor needed to manufacture one unit.
2 DL rates are expected to remain level throughout the budget period. If they are expected to change, a weighted-average can be used.
3 DL costs should include regular wages and all benefits.

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WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009-2011

Operating Budget Example

1

Total budgeted variable overhead:

Total expected direct labor hours:
VOH rate /DL hour:

$ 1,726,238
234,104 Total DL Hours from the Direct Labor Budget
$
7.37 Total budgeted variable overhead / Total expected direct labor hours

Total budgeted fixed overhead:

Fixed overhead amount per item per month:

$ 1,131,792
$
18,863 Total budgeted fixed overhead / (# items * # months), default = 60 (5 * 12)

Overhead Budget Detail

Jan-2011
Item
Item1
DL hours needed for production
VOH rate/DL hour:
Allocated VOH
Allocated FOH
Total allocated OH for Item1
Allocated OH/DL hour
DL hours/unit
Allocated OH/unit

Feb-2011

Mar-2011

Apr-2011

May-2011

Jun-2011

Jul-2011

Aug-2011

Sep-2011

Oct-2011

Nov-2011

Dec-2011

3,500
3,512
3,529
3,544
3,558
7.37
7.37
7.37
7.37
7.37
25,797
25,883
26,011
26,118
26,225
18,863
18,863
18,863
18,863
18,863
$ 44,660 $ 44,746 $ 44,874 $ 44,981 $ 45,088
Total allocated OH / DL hours needed for production
Hours from the Direct Labor Budget
Allocated OH/DL hour * DL hours/unit

3,570
7.37
26,310
18,863
$ 45,173

3,587
7.37
26,438
18,863
$ 45,302

3,602
7.37
26,545
18,863
$ 45,408

3,616
7.37
26,652
18,863
$ 45,515

3,628
7.37
26,738
18,863
$ 45,601

3,645
7.37
26,866
18,863
$ 45,729

3,660
7.37
26,973
18,863
$ 45,836

1,481
7.37
10,916
18,863
$ 29,780

1,484
7.37
10,937
18,863
$ 29,800

1,487
7.37
10,958
18,863
$ 29,821

1,491
7.37
10,989
18,863
$ 29,852

1,497
7.37
11,030
18,863
$ 29,893

1,498
7.37
11,040
18,863
$ 29,903

1,502
7.37
11,071
18,863
$ 29,934

1,506
7.37
11,102
18,863
$ 29,965

1,511
7.37
11,133
18,863
$ 29,996

1,513
7.37
11,154
18,863
$ 30,017

1,518
7.37
11,185
18,863
$ 30,048

1,522
7.37
11,216
18,863
$ 30,079

6,090
7.37
44,883
18,863
$ 63,747

6,044
7.37
44,541
18,863
$ 63,405

6,003
7.37
44,242
18,863
$ 63,105

5,962
7.37
43,943
18,863
$ 62,806

5,922
7.37
43,644
18,863
$ 62,507

5,878
7.37
43,323
18,863
$ 62,186

5,838
7.37
43,024
18,863
$ 61,887

5,800
7.37
42,746
18,863
$ 61,609

5,759
7.37
42,447
18,863
$ 61,310

5,719
7.37
42,148
18,863
$ 61,011

5,678
7.37
41,848
18,863
$ 60,712

5,641
7.37
41,570
18,863
$ 60,434

3,033
7.37
22,353
18,863
$ 41,216

3,045
7.37
22,442
18,863
$ 41,305

3,060
7.37
22,552
18,863
$ 41,415

3,069
7.37
22,619
18,863
$ 41,482

3,087
7.37
22,751
18,863
$ 41,614

3,096
7.37
22,818
18,863
$ 41,681

3,111
7.37
22,928
18,863
$ 41,791

3,120
7.37
22,994
18,863
$ 41,858

3,135
7.37
23,105
18,863
$ 41,968

3,147
7.37
23,193
18,863
$ 42,057

3,162
7.37
23,304
18,863
$ 42,167

3,171
7.37
23,370
18,863
$ 42,233

4,925
7.37
36,294
18,863
$ 55,157

5,015
7.37
36,959
18,863
$ 55,822

5,109
7.37
37,656
18,863
$ 56,519

5,206
7.37
38,367
18,863
$ 57,231

5,305
7.37
39,095
18,863
$ 57,958

5,401
7.37
39,807
18,863
$ 58,670

5,506
7.37
40,581
18,863
$ 59,444

5,607
7.37
41,324
18,863
$ 60,187

5,712
7.37
42,097
18,863
$ 60,961

5,819
7.37
42,887
18,863
$ 61,750

5,928
7.37
43,692
18,863
$ 62,555

6,040
7.37
44,512
18,863
$ 63,375

Jan-2011
$ 44,660
29,780
63,747
41,216
55,157
$ 234,560
19,029
$ 12.33

Feb-2011
$ 44,746
29,800
63,405
41,305
55,822
$ 235,078
19,099
$ 12.31

Mar-2011
$ 44,874
29,821
63,105
41,415
56,519
$ 235,735
19,188
$ 12.29

Apr-2011
$ 44,981
29,852
62,806
41,482
57,231
$ 236,351
19,272
$ 12.26

May-2011
$ 45,088
29,893
62,507
41,614
57,958
$ 237,060
19,368
$ 12.24

Jun-2011
$ 45,173
29,903
62,186
41,681
58,670
$ 237,614
19,443
$ 12.22

Jul-2011
$ 45,302
29,934
61,887
41,791
59,444
$ 238,358
19,544
$ 12.20

Aug-2011
$ 45,408
29,965
61,609
41,858
60,187
$ 239,027
19,635
$ 12.17

Sep-2011
$ 45,515
29,996
61,310
41,968
60,961
$ 239,750
19,733
$ 12.15

Oct-2011
$ 45,601
30,017
61,011
42,057
61,750
$ 240,435
19,826
$ 12.13

Nov-2011
$ 45,729
30,048
60,712
42,167
62,555
$ 241,210
19,931
$ 12.10

Dec-2011
$ 45,836
30,079
60,434
42,233
63,375
$ 241,957
20,033
$ 12.08

Total
42,952

$ 542,914
$
12.64
2.9
$
36.66

DL hours needed for production from the Direct Labor Budget

From above
"DL hours needed for production" * "VOH rate/DL hour"
From above

Item2
DL hours needed for production
VOH rate/DL hour:
Allocated VOH
Allocated FOH
Total allocated OH for Item2
Allocated OH/DL hour
DL hours/unit
Allocated OH/unit

18,010

$ 359,089
$
19.94
1.4
$
27.92
Item3

DL hours needed for production

VOH rate/DL hour:
Allocated VOH
Allocated FOH
Total allocated OH for Item3
Allocated OH/DL hour
DL hours/unit
Allocated OH/unit

70,334

$ 744,718
$
10.59
2.9
$
30.71
Item4

DL hours needed for production

VOH rate/DL hour:
Allocated VOH
Allocated FOH
Total allocated OH for Item4
Allocated OH/DL hour
DL hours/unit
Allocated OH/unit

37,236

$ 500,788
$
13.45
3.0
$
40.35
Item5

DL hours needed for production

VOH rate/DL hour:
Allocated VOH
Allocated FOH
Total allocated OH for Item5
Allocated OH/DL hour
DL hours/unit
Allocated OH/unit

65,573

$ 709,628
$
10.82
2.1
$
22.72

Overhead Budget Summary

Total allocated overhead by item

Grand total
Total DL Hours by Month
Average OH/DL hour for company

Item1
Item2
Item3
Item4
Item5

542,914
359,089
744,718
500,788
709,628
$ 2,857,136
234,104
$
12.20

Notes:
1 For simplicity's sake, in this example, variable overhead expenses are allocated by direct labor hours.
2 Overhead includes all expenses that are realized from converting raw materials into finished goods ready to ship.

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WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accounta

Operating Budget Example

Ending Finished Goods Inventory
Item
Item1
Ending inventory
Cost of direct materials
Cost of direct labor
Cost of overhead
Total cost

Per Unit

Total
Dec-2011

$ 25.56
40.40
36.66
$ 102.62

443
$ 11,323
17,897
16,240
$ 45,461

$ 131.79
22.90
27.92
$ 182.61

381
$ 50,212
8,725
10,638
$ 69,574

$ 46.59
36.63
30.71
$ 113.93

678
$ 31,588
24,835
20,821
$ 77,245

$ 83.73
48.39
40.35
$ 172.47

371
$ 31,064
17,953
14,970
$ 63,986

$ 29.91
27.80
22.72
$ 80.43

1,019
$ 30,478
28,328
23,152
$ 81,958

Plus ending inventory from the Production Budget

Total Material Cost from Direct Materials Budget * Ending inventory
Direct Labor Cost/Unit from Direct Labor Budget * Ending inventory
Allocated OH/unit from Overhead Budget * Ending inventory

Item2
Ending inventory
Cost of direct materials
Cost of direct labor
Cost of overhead
Total cost
Item3
Ending inventory
Cost of direct materials
Cost of direct labor
Cost of overhead
Total cost
Item4
Ending inventory
Cost of direct materials
Cost of direct labor
Cost of overhead
Total cost
Item5
Ending inventory
Cost of direct materials
Cost of direct labor
Cost of overhead
Total cost
Total ending inventory value

$ 338,224

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WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009

Operating Budget Example

Cost of Goods Sold Budget

Beginning FG inventory

Item Quantity Value

Item1
422 $ 102.62
Item2
370
182.61
Item3
736
113.93
Item4
354
172.47
Item5
815 $ 80.43

Extended Value
$
43,306 Quantity = (Less) beginning inventory from the Production Budget
67,566 Value = Total cost from the Ending FG Inventory Budget
83,852 Extended value = Quantity * Value
61,054
$
65,550
$
321,329

Item1
Item2
Item3
Item4
Item5

14,811
12,864
24,253
12,412
31,225

Item1
Item2
Item3
Item4
Item5

(443) $ 102.62
(381)
182.61
(678)
113.93
(371)
172.47
(1,019) $ 80.43

Total
Manufactured units and costs

$ 102.62
182.61
113.93
172.47
$ 80.43

Cost of goods manufactured

Cost of goods available for sale
Ending FG inventory

$
$

1,519,905 Quantity = Units to be produced from the Production Budget

2,349,095
2,763,144
2,140,698
2,511,427
11,284,269

11,605,597 Total of Beginning FG Inventory + Cost of goods manufactured

(45,461) Quantity = Plus ending inventory from the Production Budget

(69,574)
(77,245)
(63,986)
(81,958)
(338,224)

Total

$
$

Cost of goods sold

11,267,373 Cost of goods available for sale - Total Ending FG inventory

WHITE CELLS ARE ADJUSTABLE

Kristoffer Burnett - Certified Management Accountant, 2009

Operating Budget Example

SG&A Budget
Department
Fixed/Variable
Finance/Accounting
Fixed
Sales/Marketing
Variable
Research/Development
Fixed
Shipping
Variable
Customer Service
Fixed
Total

Jan-2011

Feb-2011

Mar-2011

Apr-2011

May-2011

Jun-2011

Jul-2011

Aug-2011

Sep-2011

Oct-2011

Nov-2011

Dec-2011

Total
480,690
848,276
565,517
395,862
537,241
$ 2,827,586

$ 40,826
72,045
48,030
33,621
45,629
$ 240,151

$ 36,875
65,073
43,382
30,368
41,213
$ 216,911

$ 40,826
72,045
48,030
33,621
45,629
$ 240,151

$ 39,509
69,721
46,481
32,537
44,157
$ 232,404

$ 40,826
72,045
48,030
33,621
45,629
$ 240,151

$ 39,509
69,721
46,481
32,537
44,157
$ 232,404

$ 40,826
72,045
48,030
33,621
45,629
$ 240,151

$ 40,826
72,045
48,030
33,621
45,629
$ 240,151

$ 39,509
69,721
46,481
32,537
44,157
$ 232,404

$ 40,826
72,045
48,030
33,621
45,629
$ 240,151

$ 39,509
69,721
46,481
32,537
44,157
$ 232,404

$ 40,826
72,045
48,030
33,621
45,629
$ 240,151

Notes:
1 These amounts will include any expense that was not included in overhead (except interest and taxes). Unlike DM, DL, and OH, they can not be inventoried.