Budgeting Basics and Beyond

9.7. Conclusion

This chapter has emphasized manufacturing budgets. The process involves developing a sales forecast and, based on its magnitude, generating production and manufacturing expense budgets needed by a specific firm. Once developed, the budgeting system provides management with a means of controlling its activities and of monitoring actual performance and comparing it to budget goals.

A comprehensive profit planning and control program involves budgeting the materials and parts used in the production process. The budget process involving manufacturing expenses includes the material usage and purchase budgets, direct labor budgets, and factory overhead budgets.