Víctor Iglesias Cortés
The operating budget communicates an organization’s sales and production goals and the
resources needed to achieve these goals.
In chapter 8, we studied the steps to preparing the operating budget. List these steps (in the
order taught) and describe your understanding of the steps in a sentence for each step.
The operating budget or operating budget is one of the instruments for achieving
adequate financial planning.
The operating budget is a financial document that helps a company to make important
decisions about its activities, especially inherent in the nature of its expenditure and
disbursements amounts and time horizon for its implementation.
The steps of an operating budget are as follows:
– Sales Budget means “the money you receive from customers” when they have
bought you a product or service.
– Production Budget: it´s tells you how many units of each product to produce to meet
sales needs and inventory requirements.
– Cost of Goods Sold Budget: The cost of goods sold is the cost directly attributable to
the production process of goods sold by a company. This consists of various inputs that
have to be estimated by the company through a thorough cost accounting.
– Selling and Administrative Expense Budget: Administrative expenses are the expenses
of a company that are not directly related to manufacturing or sales
– Income Statement: The income statement is a summary of how a business operates
over a particular accounting period such as a month, quarter, or year.