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In the last article-cum-lecture of Budgeting we learnt to make a Production Budget on the basis of Sales forecast or sales budget. Now to achieve budgeted production; the core importance is the availability of direct raw material to be used in production. Therefore, now we'll learn to prepare Direct Material Budget in terms of quantity and amounts. In the process of Budgeting, never ever forget to incorporate the factors like inflation, price hike, lead time variation and other factors that can effect your budgeting exercise negatively.
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