Operational Budget

What does it mean ???

A plan for expenditures required to maintain the functioning of a Business venture or Public organization.

What does it consists of ???

Includes anticipated Material, Machine & Labor Costs needed to run the business & to manufacture products or provide services.

Direct Materials Purchases Budget States the amount & cost of each type of

raw material.

Direct Labor BudgetStates the budgeted hours for direct labor & number of units of direct labor requiredon each machine.

Overhead BudgetStates everything left over from production

that isn’t included in the above two budgets.

Production Budget

Making of Bread

Finished Good = Bread

Packing Machine3 Hours 2 Workers

Slicing Machine2 Hours 1 Worker

Oven 3 Hours 1 Worker

Mixing & Blending Machine2 Hours 1 Worker

Sieving Machine2 Hours 1 Worker

Raw Material = Wheat flour, Ghee.

Quantity = 1000 Breads per Shift

THANK YOU…!!!

• 2.  Production Budget The production budget tells the business owner how many units of the product to produce to meet sales needs and ending inventory requirements. There are three parts to the production budget: direct materials purchases budget, direct labor budget, and overhead budget. Each is required to produce the production budget.

• 3.  Direct Materials Purchases Budget The direct material purchases budget deals with the raw material that the firm needs for its production process. It states the amount and cost of each type of raw material needed by the firm, but a separate direct materials purchases budget must be prepared for each type of raw material. The firm's inventory policy helps determine the amount of raw materials kept in inventory.

• 4.  Direct Labor Budget The budgeted hours for direct labor are determined by the relationship between labor and output. The number of units of direct labor are determined in the production budget. Then, the total number of direct labor hours and the per unit cost are determined.

• 5.  Overhead Budget The overhead budget is everything left over from production that isn't included in the direct materials purchases and direct labor budgets. Usually, the direct labor budget drives the overhead budget. The costs that vary with direct labor are called variable overhead and everything else is fixed overhead