Professional Documents
Culture Documents
Preparing Budgets
Types of Budget
Introduction
Short term
Top, middle, and operational management involvement
Usable guidelines to implement strategic and tactical plans
Allocates resources
Standard against which performance can be measured
Functional Budget
Functional budget consists of the following categories of budgets;
Sales budget
Production budget
Material budget
Labour budget
Manufacturing overhead budget
Administrative expenses budget
Selling and distribution budget
Cash budget
Master budget
Sales Budget
It assumes that conditions will remain static It designed to change according to changed conditions.
Costs are not classified according to variability e.g. Costs are classified according to nature of their
fixed, variable, semi variable variability
Comparison of actual and budgeted performance can Comparisons are realistic as the changed plan figures
not be correct if the volume of output differ. are placed against the actual ones.
It has limited application and inefficient tool for cost It has more application and can be used as efficient tool
control for cost control
If the budget and actual activity level vary, the correct It helps in fixation of prices and submission of tender s
ascertainment of cost and fixation of price became due to correct ascertainment of costs.
difficult.
Only one budget at a fixed level activity is prepared due Series of budget are prepared at different level of
to unrealistic expectation on part of management activity.
Budget on the Bases of Time Period
Task one.
Group Discussion