This document provides an overview of budgets and the budgeting process. It defines what a budget is and explains that budgets are prepared in advance to help achieve financial goals. The document then discusses different types of budgets like sales budgets, production budgets, and personnel budgets. It provides examples of how these budgets are formulated. The document also explains the organizational structure needed for budgetary control, including defining budget centers and committees. Finally, it briefly introduces the concept of zero-based budgeting.

1. PRESENTED BY
– GROUP 5

2. BUDGET –
A budget is a financial or quantitative
statement , prepared prior to a defined period of
time , for the purpose of attaining a given
objective
BUDGETRY CONTROL –
It is a
of planning and controlling COSTS.
system

3. ORGANIZATION FOR BUDGETRY CONTROL
 Budget Centre
 Organization Chart
 Budget Committee
 Budget Manual
 Budget Period
 Level of Activity
 Principal Budget Factor Sales Activity
Plant Capacity
Raw Material
Labour
Management
Working Capital

4. Chief
Executive
Budget
Officer
Purchase
Manager
Develop
Manager
Purcha
sing
Budget
R&D
Budget
Sales
Manager
Selling
and
Dist.
Budget
Production
Manager
Produc
tion
Budget
Personnel
Manager
Labour
Account
ant
Producti
on cost
Admin.
Cost,
Capital
expendit
ure

5. A functional budget is a budget of INCOME
and/or EXPENDITURE applicable to particular
function.
FUNCTION- Refers to a department or a
process.
Example – Sales , production , Purchase ,
Administration Cost etc…

6. The SALES BUDGET is a forecast of total sales which may be
expressed in monetary or qualitative terms.
Generally quantitative budget is prepared first then it is translated
into monetary value
Example
Budgeted sales for year 2004
X - 1600 units at Rs. 10 each
Y - 800 units at Rs. 9 each
Actual sales for year 2004
X- 2000 units at Rs. 10 each
Y- 400 units at Rs. 9 each
Budgeted sales of 2005 X- 1920 at 11/Y- 840 at 8/-

7. The Selling and Distribution Cost Budget is a forecast of the
cost of selling and distribution of the goods during the
budget period.
Budget is based upon the SALES VOLUME
ELEMENT OF COST
BUDGET
PREVIOUS BUDGET
1) Direct selling
expenses
Salaries
Commissions, etc…
-
-
2) Sales Office Expenses
-
3)Distribution Expenses
-
4)Advertising Expenses
-
TOTAL
1+2 +3 + 4
1+2 +3 + 4

8. Production Budget is a forecast of the production for
the budget period. It may be expressed in terms of –
• Units
• Standard Hours(A standard hour is the quality of output
or amount of work which should be performed in one
hour)
Production budget is prepared on the basis of





Sales Budget.
The production capacity of the factory.
The estimated changes in stock position.
The inherent loss in production, if any.
The policy governing the manufacturer or purchase of
components.

9. The budget represents the purchase to be made during the budget
period. This will include direct and indirect materials and services.
The purchasing budget may be expressed in terms of quantity or
money.
PURPOSE OF PURCHASE BUDGET
• To indicate cash requirements in respect of purchase to
be made during budget period
• To enable the purchasing department to plan its
operations in time in respect of purchase so that long
term forward contract be arranged for

10. Example
One TV needs
3 picture tube
On 1st Dec following stock was in godown
TV – 100
Picture Tube – 600
Sales Position
NOV – 2000
DEC - 3000
JAN - 2500
FEB - 3500
MARCH – 4000 APRIL - 5000.
It is expected that 10% of TV , picture tube of next month requirement
will be kept in stock from 31st Dec onwards.
Prepare Production and Purchase budget for DEC , JAN, FEB .

11. PRODUCTION BUDGET FOR TV
Particulars
Dec
Jan
Feb
Mar
April
Closing
stock of
finished
products
250
350
400
500
(+) units to
be sold
3000
2500
3500
4000
5000
(-) Opening
stock of
finished
goods
100
250
350
400
500
Units to be
produced
3150
2600
3550
4100
4500

12. PURCHASE BUDGET FOR Picture Tube
Particular
Dec
Jan
Feb
Closing stock 780
of raw
material units
1065
1230
(3150*3)=9450
(+) Raw
Material units
required for
production
(2600*3)=
7800
(3500*3)=
10650
(4100*3)=
12300
600
780
1065
1230
9630
8085
10815
(-) Opening
stock of raw
material unit
Units to be
produced
March

13. PRODUCTION COST BUDGET
This budget is a forecast of the cost of production estimated
in the Production Budget.
Example
Period – April 2013
Particulars
Dep 1
Dep 2
Dep 3
TOTAL
Production as per
Budget(Units)
250
300
600
1150
Direct Material
2
3
4
9
Direct Labour
5
4
1
10
Direct Expenses
9
7
5
21
Factory Overheads
4
3
2
9
PRODUCTION COST
20
17
12
49
ELEMENTS OF COST

14. PERSONNEL BUDGETThis Budget will show in financial terms , the number of working hours or in
other convenient units.
PURPOSE of PERSONNEL Budget
Classificati No of
Hours
Man-hours Rate/hr
on
workers
• Help in Labour Management.
• 1) Direct the It shows
planned outlay on direct and indirect wages .
Labour
Total
Amount
TOTAL (1)
2) Indirect
Production
-
-
-
-
Admin.
-
-
-
-
Selling &
Dist.
-
-
-
-
R&D
-
-
-
TOTAL (2)
TOTAL
(1+2)

15. PLANT UTILIZATION BUDGET
This Budget shows the estimated plant facilities required to meet the
budgeted production as set out in production budget.
REPAIRS and MAINTENANCE BUDGET
This budget may be set in four parts –
Preventive , emergency , major and for cost related to Maintenance
Budget
CAPITAL EXPENDITURE BUDGET
Planned for capital in monetary terms. It is prepared for long term.
All the fixed assets are valued in monetary terms.

16. Also Known as NIL-BUDGET
DEMAND DEPENDENT
Steps in ZBB
1) Identification of ‘DECISION UNITS’.
2) Ranking of all Decision Packages.
3) Allocation of the resources accordingly.
Advantages –
1) Careful planning.
2) Involvement of lower and middle level management.
3) Resources are allocated according to needs and benefits derived.