Chapter 9: Managing General Overhead Costs
Learning Objectives
At the completion of this chapter the student should be able to:
• Explain the difference between a budget prepared for use in determining cash flows and a
budget prepared for use in determining profitability.
Instructional Hints
• Teach trend analysis as described in Appendices.
Activities
• Divide the students into groups and have them prepare an overhead budget for the
company in Problem 10. Have each group present their budget. Discuss how much cash is
Instruction Resources
Solutions to the Textbook Problems
1. General overhead consists of those costs that cannot be specifically identified to the
2. The first type is a general overhead budget used for projection of profit. Only transactions
which create a change in profit (current period net income) are included in this budget. The
5. The cost is fixed over the range of revenue that can produced by the overhead. For example,
6. Utility Budget = ($2,797.54)(1 + 0.08) = $3,021
7. The July through December utility costs need to be doubled to take into account the office
10. For many of the budget categories in this case study there is not a single correct answer. The
budget costs for the labor and taxes on the labor are found on the Instructor’s