2 DEPARTMENTAL/OPERATING BUDGETS

Are budgets for different departments/operations in manufacturing entities.

Examples include:
Sales budget
Production budget
Material usage
Material purchases budget
Labor cost budget.

ILLUSTRATION: QUESTION 4 (b)

**** Sales budget
Shows the antipated sales units and sales value
For the sake of question, assume that SP per unit is 2,000 and 1,500 respectively for products M and K.

Product: Sales units SP per unit Sales Revenue

M 2,000 2,000 4,000,000.00
K 1,500 1,500 2,250,000.00
6,250,000.00

i) Production budget(Units only)

Shows units planned to be produced to satisfy sales demand
OS + Pdn - Sales = CS
Pdn = Sales+ CS - OS
Product:
M K
Sales 2,000 1,500 Input: Material
Closing stock 200 150 Labor
Opening stock 100 200
Pdn units 2,100 1,450

ii) Material usage budget

Material:
Exe Zed
Kgs Litres
Product:
M 4200 2100
K 4350 5800
Material usage 8550 7900

iii) Material purchases budget

Shows the planned material purchase quantity and value/cost satisfy the planned usage as per the usage budget ab
OS + Purchases - Usage = CS
Purchases = Usage+ CS-OS
Material:
 Exe Zed
Usage 8550 7900
Closing stock 855 790
Opening stock 300 1000
Purchases(Qntity) 9105 7690
Material cost/Qntity 100 70
Total material cost 910,500.00 538,300.00

iv) Labor cost budget

Shows labor quantity(Time) and cost to satisfy planned production
Labour:
Skilled Semi-skilled
Product:
M 8400 4200
K 2900 7250
Labor hours required 11300 11450
Labor rate per hour 120 80
Labor cost 1,356,000.00 916,000.00
ucts M and K.

s per the usage budget above.