Operating Budget: The Production Budget, Functions & Role in an organization

This article explain some key features,functions and role of 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 classified 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,purchasing, labor and overhead budgets. Hence it is a summary of all those budgets
• Production budgets may be analyzed by products, production 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.