Question

Why is Direct labor cost budget important to business practices & companies ?

why is Sales Budget important to business practices & companies?

Answer 1

Budgeting is one of most important tools for any organization in terms of business management.It solves 3 main purposes:

• Forecasting income and expenses ( and thus profitability)
• It is a vital tool for decion making
• It helps in monitoring business performance

A company prepares various budgets for several reasons and importance and it includes direct labor cost budget and sales budget.

Importance of Direct Labour Cost Budget

It shows the total direct labour cost and number of labor hours required for production.It helps the management to plan the labour force requirements and delegations accordingly.It is an important component of a company's master budget.It is also important since direct labour cost directly affects the operating income of a company.

Importance of Sales Budget

A sales budget reflects a company's master plan for revenue generation.It has two elements. Revenue element looks after and forecasts sales in units and value while expense element predicts and studies the costs related to the sales.It helps to create goals for an organization and the staff.Regular budgeting helps the management analyze the various costs and how they affect the sales of the company.It gives a fair idea of how much a company will earn in a given period and with this knowledge they can work of improvising in required dimensions to generate better revenue.