ACC-1B Lecture Notes - Lecture 20: Budget, Indian Railways
Document Summary
The starting point for the master budget. Based on prior sales, industry trends, and planned marketing activities. Based on the sales budget and the amount of finished goods inventory managers want to have on hand at the beginning and end of each period. If managers plan to build inventory, they need to produce more units than they plan to sell. If they want to reduce inventory, they should produce fewer units than they expect to sell. The relationship between budgeted production, sales, and finished goods inventory is summarized in the following formula: This budget depends on budgeted production needs and on planned levels of beginning and ending raw materials inventory. We define manufacturing overhead as all costs other than direct materials and direct labor that are incurred to make the product. These costs include rent, depreciation on equipment, and other indirect costs such as utilities and paper supplies.
