1.) Sales Budget:
The sales budget is the starting point in preparing the overall budget that estimates the expected sales over a specific period.
- It serves as the foundation for other budgets by predicting future sales volumes and income, helping to guide production and resource planning.
- It is expressed in amount and quantities.
Factors Considered while preparing Sales Budget:
- Past Sales
- Estimation of Sales Manager
- Capacity of Equipment
- Availability of Raw Material
- Competition
2.) Production Budget:
Production Budget is an estimation of the quantity of goods to be manufactured during the budget period.
- It is prepared after preparing the sales budget.
- It is prepared by production manager.
Factors Considered while preparing Production Budget:
- Sales Budget
- Beginning and Ending Inventory Policy
- Plant Capacity
- Production cycle
3.) Material Consumption Budget:
The material consumption budget is an estimation of the quantity of raw materials required to fulfill the production budget.
- This budget helps in tracking and controlling the amount of materials used, ensuring that sufficient materials are available for production without incurring excessive waste or costs.
4.) Material Purchase Budget:
The material purchase budget is an estimation of the materials that need to be purchased to meet production requirements.
- It includes the quantity, timing, and cost of raw materials, ensuring timely procurement and cost efficiency, avoiding stockouts, and minimizing carrying costs.
- It is prepared on the basis of material consumption budget.
5.) Merchandise Purchase Budget:
The merchandise purchase budget is an estimation of the amount and cost of goods that need to be purchased to meet projected sales.
- This budget ensures that adequate inventory levels are maintained to meet customer demand, while also controlling purchasing expenses.
6.) Direct Labor Budget:
The direct labor budget is an estimation of the labor requirements necessary to produce the types and quantities of output planned in the production budget.
- It aligns with the production budget to ensure that adequate staffing is available to meet production goals while managing labor costs and efficiency.
- It is prepared on the basis of production budget.
7.) Overhead Cost Budget:
The overhead cost budget is an estimation of all indirect expenses required to support production and business operations over a specific period.
Types of Overhead Cost Budget:
- Manufacturing Overhead Budget
The manufacturing overhead budget estimates all indirect production costs, such as factory utilities, equipment maintenance, depreciation, and factory rent.
- It allows for proper allocation of these indirect costs, ensuring accurate product costing and control over overhead expenditures.
8.) Cost of Goods Manufactured (COGM) Budget:
The cost of goods manufactured budget calculates the total manufacturing cost of producing goods during a specific period, including direct materials, direct labor, and manufacturing overhead.
- It provides insight into the cost structure of production and helps determine pricing and profitability.
9.) Cost of Goods Sold (COGS) Budget:
The cost of goods sold budget is an estimation of total costs incurred to produce goods or services.
- It is essential for calculating gross profit and understanding the cost implications of goods sold, supporting profitability analysis and pricing decisions.
10.) Administrative Expenses Budget:
The administrative expenses budget estimates all non-production, general operating costs, including office salaries, utilities, rent, and supplies.
- It allows for effective control over overhead costs that support the organization’s daily operations but are not directly tied to production or sales.
11.) Selling/Distribution Overhead Budget:
The selling and distribution overhead budget is an estimation of the expenses related to promoting, selling, and distributing products, including advertising, shipping, and sales commissions.
- It supports sales efforts and customer satisfaction by planning for costs associated with marketing and delivery.
