ACC 118 Strategic Business Analysis

Module #6

Name: _________________________________________________________ Class number: ____

Section: ____________ Schedule: __________________________________ Date: ___________

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Lesson title: FINANCIAL PLANNING AND BUDGETING (CONT.) Materials:

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Lesson Objectives: SAS
At the end of this module, I should be able to: References:

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1. prepare the overhead budget Timbang, F. L. (2015). Financial
2. accomplish the selling and administrative expenses budget, Management, Part 1. Quezon City:

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C & E Publishing, Inc.

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Managerial Accounting: The

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Cornerstone of Business
Decisions, 4e. by Mowen, M. and
Hansen D. (2012)

A COC Teacher’s Guide

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Productivity Tip: Schedule doing practice drills similar to the ones in this module two more times this week.
Spacing your practice time will help you master the process!
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A. LESSON PREVIEW/REVIEW
1) Introduction
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Looking back at your previous lessons, how do you differentiate product and period costs?
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Where does the preparation of the Overhead budget relevant to? How about the Selling and
administrative expenses budget? What makes you say so?
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In this module, we will learn about some of the components or supporting schedules of an
operating budget. We will get to see how they are computed and know the factors that must be
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considered in preparing them.

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2) Activity 1: What I Know Chart, part 1 (3 mins)

Do you know anything about operating budget? Try answering the questions below by writing
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your ideas under the first column What I Know. It’s okay if you write key words or phrases that
you think are related to the questions.
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What I Know Questions: What I Learned (Activity 4)

What is an overhead budget?

What are its components?

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 ACC 118 Strategic Business Analysis
Module #6

Name: _________________________________________________________ Class number: ____

Section: ____________ Schedule: __________________________________ Date: ___________

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Is the preparation of the
budgeted Selling and

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administrative expenses budget
important to product costs?

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Why or why not?

B.MAIN LESSON

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1) Activity 2: Content Notes

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⮚ shows the expected cost of all production costs other than direct

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materials and direct labor
⮚ many companies use direct labor hours as the driver for
overhead
Overhead budget
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⮚ costs that vary with direct labor hours are pooled and called
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variable overhead;
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⮚ remaining overhead items are pooled into fixed overhead
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Selling and ⮚ outlines planned expenditures for nonmanufacturing activities

administrative ⮚ can be broken down into fixed and variable components
expenses budget
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The following formats are relevant to the computation of the budgets mentioned above.
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 ACC 118 Strategic Business Analysis
Module #6

Name: _________________________________________________________ Class number: ____

Section: ____________ Schedule: __________________________________ Date: ___________

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2) Activity 3: Skill-building Activities A
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Let’s practice! After completing each exercise, you may refer to the Key to Corrections for
feedback. Try to complete each exercise before looking at the feedback.
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Refer to the budgets given to answer Exercises 1-3.

Exercise 1: The variable rate is P5 per direct labor hour. Fixed overhead is budgeted at P1,645
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per quarter (This amount includes P540 per quarter for depreciation). Prepare an overhead
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budget.
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Exercise 2: Calculate the Unit Product cost. The company uses two materials for its product:
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Plain T-shirts and Ink, and 5 ounces of ink per product.

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 ACC 118 Strategic Business Analysis
Module #6

Name: _________________________________________________________ Class number: ____

Section: ____________ Schedule: __________________________________ Date: ___________

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Exercise 3: Refer to the sales budget below. Variable expenses are P0.10 per unit sold. Salaries
average P1,420 per quarter; utilities, P50 per quarter; and depreciation, P150 per quarter.

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Advertising for Quarters 1 through 4 is P100, P200, P800 and P500, respectively. Prepare a
selling and administrative expenses budget.

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 ACC 118 Strategic Business Analysis
Module #6

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Section: ____________ Schedule: __________________________________ Date: ___________

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 ACC 118 Strategic Business Analysis
Module #6

Name: _________________________________________________________ Class number: ____

Section: ____________ Schedule: __________________________________ Date: ___________

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3) Activity 4: What I Know Chart, part 2
It’s time to answer the questions in the What I Know chart in Activity 1. Log in your answers in

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the table.

4) Activity 5: Check for Understanding

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Pallen Company estimated sales of 11,000 units at P40 each, unit cost of goods sold of P22,

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and marketing expense of P65,000 and a 10% commission on price for each unit sold.
Administrative expense is budgeted at P50,000. What is budgeted marketing expense?

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C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning

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Congratulations for finishing this module! Shade the number of the module that you finished.
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Did you have challenges learning the concepts in this module? If none, which parts of the module
helped you learn the concepts?
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___________________________
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Some question/s I want to ask my teacher about this module is/are:

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__________________________________________________________________________________
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___________________________

FAQ
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1. What are common examples of overhead?

⮚ Examples of fixed overheads include salaries, rent, property taxes, depreciation of assets,
and government licenses.
⮚ Examples of variable overheads include shipping costs, office supplies, advertising and
marketing costs, consultancy service charges, legal expenses, as well as maintenance and
repair of equipment.

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 ACC 118 Strategic Business Analysis
Module #6

Name: _________________________________________________________ Class number: ____

Section: ____________ Schedule: __________________________________ Date: ___________

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Homework
Study in advance:

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● Ending Finished Goods Inventory Budget
● Cost of Goods Sold Budget

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● Budgeted Income Statement

KEY TO CORRECTIONS

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Answers to Skill-Building Exercises
Exercise 1: Overhead Budget

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Exercise 2: Unit product cost and ending finished goods inventory budget
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Exercise 3: Selling and Administrative Expense Budget

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 ACC 118 Strategic Business Analysis
Module #6

Name: _________________________________________________________ Class number: ____

Section: ____________ Schedule: __________________________________ Date: ___________

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4) Activity 5: Check for Understanding
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Budgeted marketing expense = P109,000
[109,000 = P65,000 + (P40 x 0.10 x 11,000)]
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