1. A PROJECT REPORT ON
TYPES OF BUDGET

2. Budgets may be divided into two basic classes:
WHAT IS BUDGET
A budget is a systematic plan for the utilization of manpower and material resources.
Budgets may be divided into two basic classes:
Capital Budgets
Operating Budgets

3. ROLE OF BUDGET
A budget is an organization’s operation plan for a specified period
It identifies the resources and commitments required to fulfill the organization’s goals for the period.
Budget is…
a plan of operations.
a basis for allocating resources.
a communication and authorization device.
a device for motivating and guiding implementation.
a guideline for operations and gauge for controlling operations.
a basis for performance evaluation.

4. BENEFITS
It brings about efficiency and improvement in the working of the organization.
It is a way of communicating the plans to various units of the organization.
It is a way of motivating managers to achieve the goals set for the units.
It serves as a benchmark for controlling on-going operations.
It helps in reducing wastage and losses by revealing them in time for corrective action.
It serves as a basis for evaluating the performance of managers.
It serves as a means of educating the managers.

5. TYPES OF BUDGET

6. BUDGETS COVERED
SALES
PRODUCTION
DIRECT LABOUR

7. SALES BUDGET
A sales budget shows expected sales in units at their expected selling prices
A firm prepares the sales budget for a period based on the forecasted sales level, production capacity for the budget period, and long-term plan and short-term goal of the firm
A sales budget is the cornerstone of budget preparation because a firm can complete the plan for other activities only after it identifies the expected sales level
The sales budget is prepared by multiplying the expected unit sales volume for each product by its anticipated unit selling price.

8. For the year Ending December 31,2009
SALES BUDGET
For Hayes Company, sales volume is expected to be 3,000 units in the first quarter with 500-unit increments in each succeeding year. Based on a sales price of $60 per unit, the sales budget for the year by quarters is shown below:
HAYES COMPANY
Sales Budget
For the year Ending December 31,2009
Quarter 1 2 3 4
Year
Expected unit sales
3000
3500
4000
4500
15000
Unit selling price
$60
Total sales
$180,000
$210,000
$240,000
$270,000
$900,000

9. PRODUCTION BUDGET
A firm prepares a production budget after determining the number of units that it expects to sell
It is a plan for acquiring the resources needed to carry out the manufacturing operations
The total number of units to be produced depends on the budgeted sales, the desired units of finished goods ending inventory, and the units of finished goods beginning inventory.
It is derived from the budgeted sales units (per sales budget) plus the desired ending finished goods less the beginning finished goods units.
The production requirement formula is:
Budgeted Sales Units
Desired Ending Finished Goods Units
Beginning Finished Goods Units
Required Production Units

10. PRODUCTION BUDGET
Hampton Freeze, Inc. Production Budget For the Year Ended December 31, 2009
Quarter 1 2 3 4
Year
Budgeted sales
10,000
30,000
40,000
20,000
100,000
Add desired ending inventory of finished goods*
6,000
8,000
4,000
3,000
Total needs
16,000
38,000
44,000
23,000
103,000
Less Beginning inventory of finished goods**
2,000
Required production
14,000
32,000
36,000
19,000
101,000

11. DIRECT LABOUR BUDGET
To prepare the direct labor budget, a company would use its production budget
The direct labor budget enables the personnel department to plan for hiring and repositioning of employees
A good labor budget helps the firm to avoid emergency hiring, prevent labor shortages, and reduce or eliminate the need to lay off workers
Firms usually prepare labor budget for each type of labors. For example, for each skill requirement.

12. DIRECT LABOUR BUDGET Budgeted production 790 units
Direct labor-hours per unit 5
Direct labor-hours
3,950
Direct labor cost per hour
Rs.5
Total direct labor cost
Rs.19,750

13. DIRECT LABOUR BUDGET Quarter
Hampton Freeze, Inc. Direct Labor Budget For the Year Ended December 31, 2003
Quarter 1 2 3 4
Year
Required production in cases
14,000
32,000
36,000
19,000
101,000
Direct labor hours per case
0.40
Total direct labor hours needed
5,600
12,800
14,400
7,600
40,400
Direct labor cost per hour
$15.00
Total direct labor cost*
$84,000
$192,000
$216,000
$114,000
$606,000

14. Conclusion All three budgets are connected with each other.
The sales budget is the starting point in preparing the master budget.
All other items in the master budget including production, purchase, inventories, and expenses, depend on it in some way.
Thus budget helps the firm to avoid emergency hiring, prevent shortages, and reduce cost.
By this we come to know that what all resources are available to us and because of budget we follow a systematic manner of using it.
Resources are neither under utilized or over utilized if we follow properly.
Budgets are an integral part of running any business efficiently and effectively.