 Hello in this lecture, we're going to continue on with the master budget that we started the master budget last time So if you haven't seen the first part of this you may want to look at that first and then move on to the second piece of it The second piece here is including direct labor factory overselling general and administrative parts of the master budget We will be able to list the components of the master budget create direct labor budget Create factory overhead budget create the selling expense budget and create the general and administrative budget All right, so let's go through the process first We won't go in detail of here But we do want to keep in mind the fact that all these budgets are going to tie together and we're going to do it in this order in Order to get to our master financial statements budgets of the income statement to balance sheet the cash flow budget So we're going to start off with the sales budget Then we need to do the production budget in order to get the units that we need to produce Then once we have that we can figure out how much the direct materials will need how much direct labor will need How much overhead we'll need we can also have the capital expenditure budget at this point as well as the selling and administrative budget Then we can have the total cash budget that we will need and then we can create the balance sheet and The budgeted income statement and the budgeted statement of cash flows This is the order we need to go through in order to Have everything flow in the proper format because many of these steps need to happen Prior to another thing happening. So here we go for now. Remember that last time we talked We already did the sales budget. So we did that last time here's just a recap of what it looked like We use that sales budget in order to create the production budget how much units we're going to produce We needed to produce and then we use that for step three to have the raw materials budget That's where we left off last time now. We're moving forward this time. We'll move forward to the direct labor budget. So No, we're jumping back to part two here I'm going to use the production budget to help with part four, which is the direct labor budget That's the order that we're doing this end. So we have the units that we're going to produce These are how many units we're going to produce if we're talking we're looking at like guitars That's how many guitars we need to produce. We're they're going to think about how much labor will we need in order to produce that then Okay. Well in July, we're going to say the budgeted production We're gonna have the production is just being pulled down for this calculation So there it is for July there it is for August coming straight down and there it is for September So that's how these two budgets are related the production budget and how much we're going to produce and the direct labor budget How much hours are we gonna have to need and how much money we're gonna have to spend for the labor? We're gonna take that we're gonna take that multiply times the labor required per unit now We're gonna say it takes a half an hour half, you know point five hours We usually think about labor when we think about paying people hourly obviously But when we start to measure things it could get very precise You might see something broken out of course in terms of minutes How many minutes does it take to? Get something done and just be aware that you'll need a conversion if that happens because there's 60 minutes And the conversion can be a little bit tricky So you just got to make sure that when you're thinking about The units of time the conversion between minutes to hours here We're just saying it takes Half an hour. I'm not putting 30 minutes We're putting half an hour and that of course lines up nicely to when we have to multiply times the hourly rate That's what we're gonna need so you also may be thinking well What if we pay someone salary and this type of thing? We're thinking about hourly wages in this case when we're thinking about producing the item if People get paid differently. We might have to have some kind of estimate in order to do a calculation like this We're gonna need some estimates in the budget in order to figure this out This is the type of area where you can probably picture someone with a stopwatch trying to figure out how long it takes To do a particular process and trying to figure these things out and refine our estimate down But it will need to be some type of estimate All right So then we're gonna say that the total hours needed then is gonna be the in this case the Nineteen five eighty six times the point five half an hour is the 9793 hours the twenty thousand times point five is the ten the twenty five times the point five is the ten to Fifty that's how many hours we are projecting out We will then have the hourly rate, which we're saying is fourteen dollars an hour again Some people might make more some people might make less we could get into a very complicated projection on how many you know How much hours it would be in different pay levels? But we need some estimate and this would be a the type of estimate that we would have them and then of course if we multiply that out If we have the hours times The rates per hour then we can get the dollar amount We got the hours times the rate per hour We get the dollar amount the hours times the rate the dollar amount This would be the total that we're gonna spend in Dollars again make sure that if you see something that's in minutes Make sure that you make that conversion two hours in order to multiply it then times What's probably gonna be the hourly rate is how it's game. We don't usually think about