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Introduction
Administrative cost budget is one of the budget come under functional budgets. A
functional budget is one which relates to a particular function of the business, e.g. sales
budget, production budget, purchase budget,etc.these are the components of master
budget. Specific functional budgets to be prepared in a business vary from organization.
The common type of functional budgets for a manufacturing are.
Sales budget
Production budget
Production cost budget
Raw materials budget
Purchase budget
Labors budget
Production overhead budget
Selling and distribution cost budget
Administration cost budget
Cash budget
Capital expenditure budget
Sales budget:
In most companies the sales budget is not only the most important but also the most
difficult budget to prepare. The importance of this budget arises from the fact that if
sales figure is incorrect, then practically all other budgets will be affected. The
difficulties in the preparation of this budget arise because it is not easy to estimate
consumer demand.
The sales budget is the statement of planed sales in terms of quantity and value. It
forecast what the company can reasonably expect to sell to its customers during the
budget period. The sales budget can be prepared to show sales classified according to
products, salesman, customers, territories, and periods, etc.
Production budget:
The production budget is a plan of production for the budget period. It is first drawn up
in quantities of each product and when the remaining budget have been compiled and
the cost of production calculated, then the quantities of production cost are translated
into money terms, what in effect becomes a production cost budget.
Purchase budget:
The purchase budget provides the details of the purchases which are planned to be
made during the period to meet the needs of the business. It indicates.
• The quantities of each type of raw material and other items to be purchased;
• The time of purchases;
• The estimated cost of material purchases.
Labor budget:
Labor budget is classified into direct and indirect. Some companies prepare a labor
budget that includes both direct and indirect labor, while others include only direct
labor cost and include indirect labor in the overhead cost budget.
Cash budget:
The cash budget is one of the most important and one of the last to be prepared. It is
detailed estimate of cash receipts from all sources and cash payments for all purposes
and the resultants cash balances during the budget period.