ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The production budget is a quantity budget. It determines the number of units of a firm’s product that should be produced to meet the demand of the firm’s customers based on the sales forecast and sales budget.

Detailed explanation-2: -Production Cost Budget: Production cost budget is prepared to show the cost of production for the units of budgeted production. It is also known as manufacturing cost or work cost budget and includes cost of material, cost of labour, cost of direct expenses and factory overheads.

Detailed explanation-3: -A sales budget is a financial plan that estimates a company’s total revenue in a specific time period. It focuses on two things-the number of products sold and the price at which they are sold-to predict how the company will perform.

Detailed explanation-4: -The production budget is designed by the management to estimate the number of products to be manufactured. It is designed based on the sales forecast and the budgeted amount of finished inventory.