Operating Budget Final Paper
March 25, 2012
ACC206 Final Paper
An operating budget helps to organize and manage the costs and income to run your business. It helps a company to understand day to day costs and income for the company. “A detailed projection of all estimated income and expenses based on forecasted sales revenue during a given period usually one year.” (Operating budget) Overall it is a great way to ensure that the company can see if it is set up to make and exceed its breakeven point for the year. It gives a company a chance to review any changes that need to be made in order to be profitable for the year. Elements of an operating budget include the sales budget, production budget, direct materials budget, direct labor budget, and finally the manufacturing overhead budget. When theses budgets are created, they paint a picture for the upcoming year on how profitable a company might be. These five main sub-budgets make up the operating budget and give a manager a better idea of costs and sales projection. Once these five budgets are made, a manager can use them in conjunction with each other to set the pace of manufacturing and what to expect in the upcoming year. It also gives the manager a means to figure out what needs to be done to increase profits. Everything from materials and labor to even pens and paper and rent will be shown in these budgets. The manager will receive as much information as possible from these budgets. It is imperative though to have accurate data and no mistakes. It takes a good accountant to ensure the budgets are accurate and complete. It is easy to get wrong estimates if the sales budget for instance is off. Since the production budget takes the information straight from the sales budget, then all other budgets will be askew.
The sales budget is the most important budget for a company to have. It is the key budget that all other budgets pull information from. “If the sales...
References: Bragg, S. (2012, January 01). Manufacturing overhead budget. Retrieved from http://www.accountingtools.com/manufacturing-overhead-budget
Material budgeting . (2011, January 01). Retrieved from http://www.accountingformanagement.com/material_budget.htm
operating budget. (n.d.). Retrieved from http://www.businessdictionary.com/definition/operating-budget.html
Sales budget. (2011, January 01). Retrieved from http://www.accountingformanagement.com/sales_budget.htm
WAO. (2012, January 01). The direct labor budget. Retrieved from http://worldacademyonline.com/article/13/275/the_direct_labor_budget.html
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