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They collate the activities of individual departments and summarise the collective outcome of each activity.
- Predicts cash value of sales
- Is the first schedule prepared as all other budgets are dependent on it
- Displays expected sales and units of production
- Is typically expressed in currency value and units of product
- Is dependent on each individual salesperson/marketing manager estimating sales in their respective area based on the selling price of each unit
- Needs to be influenced by seasonal trends, economic conditions, competition, pricing conditions, marketing programs etc
Figure 3: Sales Budget Schedule
- Estimates the number of units that is to be produced in a specific timeframe
- Utilises the Sales Budget to determine units needed
- The Production Budget forms the basis of the Cost of Goods Sold/Manufactured Budget
- Expressed in units of product
Figure 4: Production Budget Schedule
Support Budgets will include all costs and expense budgets relative to an organisation...
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As they are based on the estimates from the production and sales budgets, this enables an organisation calculate the materials, overheads and labour required for each period.
Cost of Goods Sold Budget â Manufacturing Business
- Applies to manufacturing businesses only
- Production runs would be scheduled to ensure inventory levels remain sufficient
- Estimates Labour, Material, and Overhead
Figure 5: Cost of Goods Sold Budget
- Allows the company to know in advance what labour requirements are needed
- Expressed in number of hours and unit cost per hour
Figure 6: Direct Labour Budget
- Estimates the currency amount of the direct materials to be produced in a specific time period
Figure 7: Direct Materials Budget
- Expressed in currency value
- Provides a schedule of all costs of production, not direct materials and direct labour
- Based on a predetermined overhead rate
Figure 8: Manufacturing Overhead Budget
Selling Expenses Budget
- Anticipates selling expenses from the Sales and Cost of Goods Sold budgets
- Collates all non production, overheads, material and labour expenses involved in manufacturing the unit
- Can be combined with the Administration Expenses Budget
- Contains both variable and fixed expenses
Figure 9: Selling Expenses Budget
Administrative Expenses Budget
- Anticipates administration expenses from the Sales and Cost of Goods Sold budgets
- Can be combined with the Selling Expenses Budget
- Contains mostly fixed expenses (depreciation etc)
Figure 10: Administrative Expenses Budget
Projects are tasks that are defined in their objective, that relate to extraordinary activities outside the general day-to-day activities of the organisation...
General points of the essay
Budgets In Manufacturing Companies
Critically discuss the various problems and proposed solutions associated with the development and application of budgets within organisations
Determine The Primary Activities And Secondary Activities Of Your Organisation. Make A Conscious Decision On Whether Your Organization Should Compete By The Least Cost Strategy Or The Product Differentiation Strategy. Determine The Cost Drivers Of...
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