What is a production budget? Why is it prepared?

What is a production budget? Why is it prepared?

Production budget is a forecast of production for the budget period. It is prepared from two angles: In terms of quantity and in terms of money. Following budgets are prepared under the production budget:

- Material Budget to estimate the material cost

- Direct Labour Cost Budget to estimate the labour cost which are required to product the quantity as specified in the production budget.

- Overhead Budget to estimate production overheads.

Production budget is prepared after taking various budgets into consideration. For a proper estimation of various costs associated with the production process makes it important to prepare production budget for the period in which production will take place.
What is a purchase budget? What things are considered before preparing it?
Purchase budget is a forecast of quantity and value of materials required to purchase during the budget period.
What is a cash budget? What are the different methods to prepare it?
Cash budget is the budget which is prepared under the finance budget. It is an estimation of the expected cash receipts…
Compare fixed and flexible budgets.
A fixed budget is established for a specific level of activity whereas flexible budget is prepared for various levels of activity….
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