Budget classification on the basis of functions, Financial Management

ON THE BASIS OF FUNCTIONS

•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
1. Let's look at the cash flow of the volatility (variance) spread swap: - ( σ 2 Nasdaq - σ 2 S & P 500 ) N 2 It is noticeable from this expression that investor

How is present value influenced by a change in the discount rate? Present value is oppositely related to the discount rate.  Alternatively, present value moves in the reverse dire

What is accumulated depreciation? Depreciation is the allocation of an initial cost over time of asset. Whereas the term accumulated depreciation is the total of all the deprec

How do we estimate expected incremental cash flows for a proposed capital budgeting project? We valuate expected incremental cash flows for a proposed project by valuating the

credit limit decision bajaj electronics company

Project Plan for my new business venture is attached) 1.     Your task is to take a look at every of the operational areas of the intended business, and verify  what financial i

Eurocurrency A currency on deposit outside its country of source. Such deposits are well known as external currencies, international currencies or xenocurrencies.

You are currently employed by DPT Holdings Ltd (DPT) one of the world's largest MNEs based in the United Kingdom. DPT is looking to enter into a new phase of global expansion activ

Stream of Expected Returns Investment returns can take many forms. An investor must consider all these forms to evaluate an investment option accurately. A brief description of

#how to calculate initial investment cash flows ..