Logical Relationship Of Budgeting Management

1309 WordsApr 30, 20156 Pages
LOGICAL RELATIONSHIP OF BUGDETINGS Budgeting management plays critical role in organizations, it can help organizations to allocate resource, force thinking about future and estimate performance base on benchmark. Normally, management team and financial function provide budget plans at the beginning of a specific period. It also plays the role of communication and co-ordination around different levels of organization. Although all of kinds of budget are run respectively, it is important to investigate interrelationship between them. The master budget relationship is showed below: Production budget, which determine number of units the company needs to produce to meet sales and ending inventory, interlinked sales budget and direct material budget, direct labor budget and manufacture overhead budget. We will discuss the logical relationship of budgets. 1. Sales budget The sales budget reflected sales expectation of a company 's for the budget period. The unit result of sales budget is the basement of production budget. To calculate sales budget, companies need variety sources of information. The most important source is historical data and marketing forecast. The sales budget result comes from budgeted sales in units by selling price per unit. It is clear that the sales budget of new product will have less accurateness then the grown up product, as there is not much data can be used. The more historical data to be concerned, the accurateness of result will be higher.
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