What Are the Different Methods of Business Budget Planning?

Business budget refers to the budget of business income and business expenses, that is, the budget of various essential basic activities of the enterprise. In the industrial system, it mainly includes direct material purchase budget, production budget, sales budget, direct labor budget, factory overhead budget, unit product factory cost budget, and management cost budget. In the commercial system, it includes the transportation and miscellaneous expenses budget, storage cost budget, packaging cost budget, interest budget, salary budget, and other cost budgets in commodity circulation costs. It and capital budget constitute two major categories of budget. ^[1]

Operating budget

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Business budget refers to the budget of business income and business expenses, that is, the budget of various essential basic activities of the enterprise. In the industrial system, it mainly includes direct material purchase budget, production budget, sales budget, direct labor budget, factory overhead budget, unit product factory cost budget, and management cost budget. In the commercial system, it includes the transportation and miscellaneous expenses budget, storage cost budget, packaging cost budget, interest budget, salary budget, and other cost budgets in commodity circulation costs. It and capital budget constitute two major categories of budget. ^[1]

The operating budget, capital budget and financial budget are the three components of a comprehensive budget. Business budget refers to the budget prepared for supply, production, sales, and management activities, which is directly related to the daily business of the enterprise, mainly including sales budget, production budget, etc. These budgets use physical and value indicators to reflect the composition of corporate income and expenses, respectively.

The business budget is based on the company's operating budget goals. It analyzes user needs, tariff standards, market share, and market competition, forecasts the number of user developments for each business in the budget year, and uses this as a starting point to prepare a business income budget. At the same time, according to business development needs, forecast business promotion, commission agency and other expenses, prepare business development cost budget, and finally form a business budget.

1. Sales budget

The sales budget is a sales plan prepared based on the target sales volume or target sales specified by the annual target profit.

2. Production budget

Production budget refers to the plan for arranging production quantities within the budget period. It is based on the sales budget and is prepared separately for each product. The basis for its preparation is: the estimated sales volume for each quarter of the sales budget, and the beginning and end of the inventory for each quarter in the planning period. The production budget method is mainly to calculate the estimated output according to the following formula and then fill it in the table.

Estimated production volume = planned sales volume + planned inventory at the end of the planning period-inventory at the beginning of the planning period

3. Direct material procurement budget

The direct material procurement budget refers to the plan for the amount of material procurement and the amount of material procurement determined in the budget period based on the production budget.

Estimated purchase amount = production demand + planned inventory at the end of the planning period-estimated inventory at the beginning of the planning period

4. Direct labor budget

The direct labor budget is based on the production budget.

Total estimated direct labor costs = estimated output × (wage rate per unit of work × fixed amount of work per unit of work)

5. Manufacturing cost budget

The manufacturing expenses include all expenses detailed items except direct materials and direct labor, which must be divided into two categories: variable expenses and fixed expenses according to cost habits. The basis for its preparation is: a certain business volume during the planning period, the cost reduction rate indicator during the planning period, and the amount of each expense detail item during the planning period.

6, unit product cost budget

The basis for formulating the unit product cost budget is: the price standard and usage standard for direct materials, the price standard and usage standard for direct labor, the price standard and usage standard for manufacturing costs, and the end-of-year inventory in the planning period.

7.Sales and management expenses budget

The basis for the preparation of this budget mainly includes a certain amount of business in the planning period, related cost reduction rate indicators, and various project cost breakdown project indicators in the planning period.