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Operating budgets - Coggle Diagram
Operating budgets
combination method
guidelines and targets are set at the top while the managers work to develop a budget within the targeted parameters.
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master budget
operating budget
To create these budgets we use information such as the standard quantity and standard price for raw materials that need to be purchased, the standard direct labour rate and the standard direct labour hours that need to be scheduled, and the standard costs for all other direct and indirect operating expenses
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knowing how many units are to be produced and how much inventory needs to be on hand is used to develop a direct materials budget.
the necessary hours of direct labour and the estimated labour rate are used to develop the direct labour budget.
overhead budget other factory costs that are not included in direct materials and labour. These are variable and fixed.
existing information regarding fixed manufacturing costs are combined with variable manufacturing costs to determine the manufacturing overhead budget
the information from the sales budget is used to determine the sales and administrative budget ehich includes the variable and fixed selling and administration costs for the business.
the sales, direct materials, direct labour, fixed manufacturing overhead budget, and sales and administrative budgets are used to develop a pro-forma income statement
rolling budget method
adjusted monthly, and a new month is added as each month passes.
master budget
financial budget
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cash budget
assist management in helping them determine whether they will have sufficient cash to repay such loans.
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