Question

What are some of the different types of budgets used by a manufacturing organization? What are these budgets used for? Are these same budgets used by service organizations? Why or why not?

Answer 1

Some of the different types of budgets used by a manufacturing organisation are :- Production Budget, Material Budget, Factory Overhead Budget, Labour Budget, Sales Budget etc.

These budgets are used for several purposes in order to know how much quantity is to be produced which is ascertained with the help of sales budget, how much materials are to be ordered by basing on material budget, amounts to be incurred on labour charges and factory overheads with the help of labour and factory overheads budget respectively.

The budgets used by the service organisations differ from that of ones used in the manufacturing organisations because the line of activity of both of them differs I.e, one is involved in.production activity and the other in service provision.

Services also Include few budgets which appears to be similar such as services of man power supply also uses labour budgets, Administrative expenses etc.

As budget itself is an estimate of the costs to be incurred for a specific task few of them seems to be interconnected and same as all are concerned with the economical activities.