Some salient points on the Production Budget
- For the production manager to know how much to produce during the budgeted period, obviously he/she needs to know the sales budgeted. Only then can he consider the production capacity and also to take account the planned closing stocks of finished goods.
- Once the volume of production is ascertained, he has to prepare a statement of expected manufacturing costs. Costs should be classifie into fixed and variable costs to allow for flexible budgeting.
- In the initial stages,the production budget is in terms of quantity.Later the quantity is expressed in terms of costs.
- Production budgets are based on sales, machine utilization,purchasng, labor and overhead budgets. Hence it is a summary of all those budgets
- Production budgets may be analyzed by products, producton departments and period
- The key factors must be determined before adopting a plan.
- The size and nature of the business will influence the preparation of production budgets.
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