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 (5) Estimate the amiounrit of. profitt that will be made on this
 volume of business.

 (6) To arrive at the Perce..tage of Overhead to be used v.'hcn
 fi^urini the Cost of etch style of ba,:;, determine the
 percentage that the total Overhead Expenses is of the
 combined total of Direct Matcrial and Direct Labor cost.

 All estimates main, up the budget shoiUcl be reasonable.

 The estimate of probable net sales for the year should represent
an amount thet the concern can reasonably be expectedC to sell during
the budgetsd year.

 The estimates of Direct Material, Direct Labor, and Overhead
Expenses should re-resent amounts that the concern must reasonably ex-
pect to expend for these iteirs during the bed.-eted year based on the
records of former years' operations and ex-)erience, with due regard to
changes that mas" be erpectcd to occur, duri.i_. the budgeted year, and
with the exceptions noted hereafter on p-:De 11.

 Fixed costs relating to buildings, machinery and equi-iment, such
as rent, depreciation, insurance and taxes, and fixed salary items
must be ut into costs on a basis of normal rates of o-eration.

 Do not overlook the method of handling interest and other items
described on page 11.

 The Standard Cost Formula sets forth rigid provisions, but minor
deviations that would not materially change the method or results may
be made.

DIRECT MATERIALS

 Direct Iqaterials are to include all those materials which can be
traced directly into the -roduct.

 Price all Direct Miaterials for cost formula at market price pre-
vailing at aq.y time withinI thirty (30) days prior to date of sale or
at actual boost if purclhwsed within four (4) months of date of sale,
whichever is lover.

 Exce-tion to this rule may be taken only upon ar-nlication to, and
approval by, the Code Authority.

 Incomin, Freight and incomin cartage on raw material are re-
gardecd as a -lart of the Direct Material Cost.

 The following items are classed as Direct 1.atcrials:

 Cover (leather or fabric) Cotton and pins, etc.
 Lining Framc-
 Pocket lining Purse Frame
 Rubber cloth Zipper
 Wadding IFirror
 Flannel Fittings
 Packing material Ornomcents
 Paper Duttons