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ADMINISTRATIVE COST BUDGET

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.

Production cost budget:


This budget shows the estimated cost of budget. The production budget shows the
quantities of production. These quantities of production are expressed in terms of cost
in production cost budget. The cost of production is shown in detail in respect of
material cost, labor cost, and factory overheads. Thus production cost budget is based
up on production budget, material cost budget, labor cost budget and factory overhead
budget.

Raw material budget:


This budget generally deals with only the direct material. Indirect material and supplies
are included in the overhead 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.

Production overhead budget:


The production overhead budget involves the preparation of over heads budgets for
each department of the factory as it is desirable to have estimates of manufacturing
overheads prepared by those individuals who have the responsibility for incurring
them.

Selling and distribution cost budget:


The sales manager is responsible for selling and distribution cost budget.he prepares
this budget with the help of heads of head of subdivisions of the sales departments

Administration cost budget:


This budget represents forecast of all administration expenses like director’s fees,
managing director’s salary, office lighting and air conditioning, etc. Most of these
expenses are fixed. So should not be too difficult to forecast.

Capital expenditure budget:


This budget represents the expenditure on all fixed assets during the budget period. It
includes such items as new buildings, machinery, land, and intangible items like
patents, etc.

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.

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