Budget classification on the basis of functions, Financial Management


•Functional / Subsidiary budgets: A subsidiary budget is a budget of income or expenditure appropriate to or the responsibility of functions, like production, sales, purchase etc. every functional department prepares its own budget, and all these functional budgets are integrated into the Master budget.

Sales budget: it describes about price, volume, and sales mix.  It also gives details about the quantity of sale, monthly or quarterly, area-wise, market- wise and on whatever other basis which is main to the organization.  The responsibility for preparation of this budget falls on the sales manager.  While preparing this budget, he/she has to think on certain influencing factors like - past sales figures and trend, salesmen's estimates, plant capacity, general trade practice, orders in hand, proposed discontinuance or expansion of products, potential market,  seasonal fluctuations, availability of material and supply, finance etc.

Production budget: It describes about the types, quantity and cost of goods and services produced in the organization.  The duty of preparing this Budget falls on the Works managers.

Production cost budget:   It is break down into material cost budget, labour cost budget and overhead cost budget, because cost of production includes material, overheads and labour.

Materials budget:  It describes about the quantity and kinds of material required, price paid for it, storage and cost of transportation etc

Labour budget:  It describes about the number and types of workers, the number of hours required, the wage rates and other allowances, the welfare and extra facilities provided and cost thereof etc.

Overheads budget : It describes about the details of items of factory overhead expenses, their quantity and cost.

Research and Development budget :  each organization of some size, particularly, of a technical or manufacturing type, has a development and Research Department. Expenses incurred by it are parts of operating costs. Until efforts lead to some findings that can be used for advancement of quality of product technology improvement, or/and for producing something that is new, at which stage all expenses incurred are capitalized.

Capital expenditure budget :  This budget describes the estimated expenditure on fixed assets like land and buildings, plant and machinery, etc. It is a long-term budget.  Capital expenditure budget is prepared to plan for replacement of old machines, expansion of activities, in- creased demand of products, etc.

Cash budget: this budget deals with cash, including its equivalent, like bank balance and bills receivable.  It defines the inflows of cash and outflows of cash during a particular period of time.  It can be prepared for a year, but for better management and control of cash, it is usually prepared on monthly basis.  It takes into account only cash transactions.

Master budget:   master budget is prepared from, and summarizes, the variety of functional budgets.  It is also known as summary budget.  It usually includes details relating to stock, debtors, production, sales, cash position, fixed assets etc, in addition to important control ratios.

Posted Date: 10/15/2012 8:15:55 AM | Location : United States

Related Discussions:- Budget classification on the basis of functions, Assignment Help, Ask Question on Budget classification on the basis of functions, Get Answer, Expert's Help, Budget classification on the basis of functions Discussions

Write discussion on Budget classification on the basis of functions
Your posts are moderated
Related Questions
Types of Financial Assets Majority of financial assets used worldwide are in the form of deposits, stocks and debt. Deposits Deposits can be made either with banking or

These securities aid in unpacking the cash flows from a pass-through. The most uncomplicated stripped mortgage-backed securities are the PO-IO-security. Unlike a

All treasury securities are issued on the basis of auction. The auction process is computerized and hence qualified broker-dealers can access it electronically. T

Briefly describe the major differences between a sole proprietorship and a corporation. Under which form would you choose for a business, and why? Describe the meaning of financi

a)   Write short note - 1) P V Ratio 2) Margin of Safety   3) Material Variances 4) Absorption Costing b)  Describe the meaning of the term 'variance an

If firm A has a higher debt-to-equity ratio than firm B then that means what

a) Stockpiles refers to the accumulated (or excess level of) supply Ford motor vehicles, i.e. too much production given the level of demand. The purpose is to prevent possible shor

Why do financial managers calculate the marginal tax rate? Financial managers make use of marginal tax rates to estimate the future after-tax cash flows from investments. As th

Briefly Explain Non Financial Objectives Monetary statements of any sort are only an expression of organisational activities that can be measured. Lots of the activities of an

Q. What is Disadvantages of IRR Method ? Disadvantages of IRR Method:- (i) Computation of IRR involves tedious calculations. (ii) Occasionally this method produces more t