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 THE PURPOSE OF THE CODE OF FAI C0Oi PETITION IS TO PROVIDE AGAINmST'
UNFAIR TRAU'E PRACTICES, CREATED BY U SCRJDPTLOUTJS PLANS, A.D TO PREVENT
SUCH UIIFAIR TRADE PRACTICES, A ],I:'I!vu OVI0E7-TAD PERCENTAGE IS ES-
TABLISHED. THIS FIGURE DOES -0T PERC.IIT )MAi1TFACTURERS WHOSE PERCENTAGE !
OF OVERHEAD IS v.uEATER ThAl -HE PlCE-AC1E P i`IOVED) TO FIGURE ANY LESli
THAT THEIR ACTUAL PERCE-p3'A1E. TO r:?s:E,-0' H..L)3hIP I PARTICULAR SITUA.,:
TIONS CERTAIFIT ECEPT 10C13 1AVL WiFII ALi !0-.IZED. ,

 To arrive at the correct overhead to be addedl to the total cost of?:"
Direct Material and Direct Labor, it is necessary to -rc-)are a budget |,
for a periodd of a year's operation. The estimr.tes of figures entering i
into the bi.-.et must be made from records of former years' o-)erations ,
and exrerience, and should be based x-on an. cxr.)ecttion of normal ..
business conditions. ,J

ILLUSTRAT0I0! OF A BUDGET i,[

 (1) Estimated ITet Sales $100,000 |
 (2) Estimated Discounts Allowed to Customers 3,000

 97,000 I

 (3) Estimated Direct itaterial and Direct
 -Labor $66,000
 (4) Estimated Overhead Ex-.enses 22,0,O "
 TOTAL COST 88,0CO
 (5) Profit $ 9,000 I

 (6) In the above illustration the estimated overhead ($22,000) ||,
 is 33 1/3,; of the estimated Direct Ilsterial and Direct Laborl:
 (066,000). Therefore 33 1/3? is the -ercentage to be used i
 in the Cost Formula to figure the cost of each style of bag.10,

 The percentage, of overhead must be comiuted br each individual
concern, and each one will use his percentaoc figure arrived at in thia.ii
manner (except as p-rovided on Pa:r i.) 1.'o flat -)ercenta-e rate of i
overhead for the entire industry can be usea. |

TO PREPARE T:-E .RD,.ET, 'IQ

 (1) Estimate the probc;le 'ot Sales. (Gross Sales, less
 Return Sales, Less Allova:.ce)

 (2) 3ased on the estimated V't Sales, figure the Discou.Lts
 Allowed to Customors.

 (3) 3ascd on the estimated Fet Sales, fire the necessary
 Direct Material a..d Direct Labor Costs to produce the
 amount of product sold.

 (4) Based on the estimated Yet Sales, estimate the total of
 all other costs, factor,- Ex)c-risos, Desirning Eypenses,
 Selling Expenses, Distribution Ex.enses, Administrative
 and General Expenses (hereafter referred to as "Overhead
 Expenses") necessary to reducee and sell this amount of
 product,
9811 ,,
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