Question

In: Accounting

At what point in the budget planning process should production be involved?

At what point in the budget planning process should production be involved?

Solutions

Expert Solution

Budget Planning process becomes very important process now a days in any business organisation to predict the revenue, to predict the requirement of sources for production and sale of the goods and services and to ensure that specific goal will be achieved with the prescribed action plan.

In the Process First step comes to predict the Future demands related to the goods or services in which organisation is dealing.

After that in second step the Production schedule and Production budget is prepared. How many units need to be produced, if in case organisation is dealing in multi product or services than which product will be produced with how many units, etc are decided in Production budget. In case of Bottleneck resources, Production BUdget is prepared accordingly which maxmimise the Profit with the efficient use of the Bottleneck Resource.

Therefore in My opinion Production shall be involved in Second Step after determining the demands and before making the Budgets of the other Expenses related to the Production.

After the Production is finalised, Raw Materials Budget, Direct Labor Budget, Overheads Budget is prepared.


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