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. This budget is closely connected to the production budget. Following points are required to be considered before preparing the purchase budget:
- Opening and Closing balances of stocks
- Materials purchased and reserved for specific purpose
- Orders already placed
- Quantity required by the production
- Prices of materials.
- Storing facilities and Economic order quantity.
- Availability of funds