A sales budget is a detailed schedule showing the expected sales for the budget period; typically, it is expressed in both dollars and units of production. An accurate sales budget is the key to the entire budgeting in some way. If the sales budget is sloppily done then the rest of the budgeting process is largely a waste of time.
Uses of sales Budget
The sales budget will help determine how many units will have to be produced. Thus, the production budget is prepared after the sales budget. These budgets are then combined to cash budget. In essence the sales budget triggers a chain reaction that leads to the development of the other budgets. In a sales budget budgeted sales are multiplied by the unit sales price.
A detailed plan showing the number of units that must be produced during a period in order to meet both sales and inventory needs.
Uses of Production Budget
The production budget is used to determine the budgets for manufacturing costs including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.
Direct Material Budget
Materials budget is detailed plan that shows the raw materials that must be purchased to fulfill the production requirements and to provide for adequate inventories.
Uses of Direct Material Budget
This will ensure that the right materials are on hand, in the right quantities, and at the right time to support the production budget.
Direct Labor Budget
Direct labor Budget is schedule of direct labor requirements computed to ensure that sufficient labor time is available to meet the budgeted production needs.
Uses of Direct Labor
By knowing in advance how much labor will be needed throughout the budget year, the company can develop plans to adjust the labor force as situation requires.
Manufacturing Overhead Budget
The manufacturing overhead budget is schedules for all costs of production other than direct materials and direct labor.
Uses of Manufacturing Overhead Budget
This budget helps to identify that all the overheads including cash and noncash expenses.
Selling and administrative expense budget
The selling and administrative expense budget is lists of budgeted expenses for areas other than manufacturing.
Uses Selling and administrative expense budget
This budget helps in preparing a budgeted income statement.
Budgeted income statement
Budgeted income statement is schedule of the all income and expenditure during a particular time.
Uses Budgeted income statement
This budget is used to identify the profit /loss for specified time.
The cash budget is schedule consisting receipts, disbursements and financing sections.
Uses of cash budget
Helps to plan the cash inflows and outflows for particular period. Execess or deficiency will result look for further financing.