TYPES OF BUDGET

1. TYPES OF BUDGET A PROJECT REPORT ON

2. WHAT IS BUDGET • A budget is a systematic plan for the utilization of manpower and material resources.

3. ROLE OF BUDGET • A budget is an organization’s operation plan for a specified period • It identifies the resources and commitments required to fulfill the organization’s goals for the period. • Budget is… • a plan of operations. • a basis for allocating resources. • a communication and authorization device. • a device for motivating and guiding implementation. • a guideline for operations and gauge for controlling operations. • a basis for performance evaluation.

4. BENEFITS • It brings about efficiency and improvement in the working of the organization. • It is a way of communicating the plans to various units of the organization. • It is a way of motivating managers to achieve the goals set for the units. • It serves as a benchmark for controlling on-going operations. • It helps in reducing wastage and losses by revealing them in time for corrective action. • It serves as a basis for evaluating the performance of managers. • It serves as a means of educating the managers.

5. TYPES OF BUDGET

6. BUDGETS COVERED

7. SALES BUDGET • A sales budget shows expected sales in units at their expected selling prices • A firm prepares the sales budget for a period based on the forecasted sales level, production capacity for the budget period, and long-term plan and short-term goal of the firm • A sales budget is the cornerstone of budget preparation because a firm can complete the plan for other activities only after it identifies the expected sales level • The sales budget is prepared by multiplying the expected unit sales volume for each product by its anticipated unit selling price.

8. SALES BUDGET • For Hayes Company, sales volume is expected to be 3,000 units in the first quarter with 500-unit increments in each succeeding year. Based on a sales price of $60 per unit, the sales budget for the year by quarters is shown below:

9. PRODUCTION BUDGET • A firm prepares a production budget after determining the number of units that it expects to sell • It is a plan for acquiring the resources needed to carry out the manufacturing operations • The total number of units to be produced depends on the budgeted sales, the desired units of finished goods ending inventory, and the units of finished goods beginning inventory. • It is derived from the budgeted sales units (per sales budget) plus the desired ending finished goods less the beginning finished goods units. • The production requirement formula is:

10. PRODUCTION BUDGET

11. DIRECT LABOUR BUDGET • To prepare the direct labor budget, a company would use its production budget • The direct labor budget enables the personnel department to plan for hiring and repositioning of employees • A good labor budget helps the firm to avoid emergency hiring, prevent labor shortages, and reduce or eliminate the need to lay off workers • Firms usually prepare labor budget for each type of labors. For example, for each skill requirement.

12. DIRECT LABOUR BUDGET

13. DIRECT LABOUR BUDGET

14. Conclusion • All three budgets are connected with each other. • The sales budget is the starting point in preparing the master budget. • All other items in the master budget including production, purchase, inventories, and expenses, depend on it in some way. • Thus budget helps the firm to avoid emergency hiring, prevent shortages, and reduce cost. • By this we come to know that what all resources are available to us and because of budget we follow a systematic manner of using it. • Resources are neither under utilized or over utilized if we follow properly. • Budgets are an integral part of running any business efficiently and effectively.