Saturday, April 2, 2011

What Is an Operating Budget?

The operating budget reflects in the projected income statement and is the centerpiece of the budgeting system.
It generally consists of several sub-budgets, most important one being the sales budget which is prepared first. Since an operating budget is a short term budget, capital outlays are excluded because they are long-term costs.

It is built up in terms of following subbudgets:

1. Sales forecast
2. Production budget
3. Materials and purchases budget
4. Labour cost budget
5. Manufacturing overhead budget
6. Non-manufacturing cost budge

The focus of an operating budget is to ensure that there are funds to maintain the continued operation of a business, and that those funds are distributed in the most cost-efficient manner. Most experts believe that an operation budget should begin with a sales budget. An operating budget should also project expenses. 



Other Related Posts  :

What are budgets and its benefits

Profit Addition through CFO

Basic Principles of Economics



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