Question

What information is necessary for the operating budgets?

Answer 1

The below information is required for the operating budgets :

1) Actual sales, Cost of sales Receivables , payables, inventory for the previous reporting period like quarter, half year, monthly or year.

2) Forecast of sales in terms of units and expected selling price for the budgeting period '

3) Expected percentage of cost of goods sold from the revenue based on the pattern followed by the firm

4) Pattern of collection and purchase payment to vendors based on the history of collections/ payments made to vendor

5) Desired inventory levels to be maintained by the firm based on the trend followed for raw materials and finished goods

6) Expected expenses - capital/ revenue with details like amount, month along with financing component associated with it,

7) Expected cash balance to be maintained based on history and current requirements. Based on the same, financing arrangements to be made.

8) Any other income expected like dividends, gain on sale of old equipment etc., to be forecasted.