Functional Budget Analysis

Functional Budget
The cost and profits plan produced for a particular process or department operating within a business. For example, a functional budget for the manufacture of a manufactured goods line might contain estimated costs of production, marketing, sales, labour, equipment and materials, as well as projected sales income.

1. Sales Budget

Sales budget of the company will be as follows:

Description Total Pots Carpets
Sales units (2:1) 9,000 6,000 3,000
Sales value (Rs) 30,00,000 24,00,000 6,00,000

Theory

Description Calculation Units (Rs)
Pots 9,000 x 2/3
6,000 x Rs.400 6,000
6,00,000
Carpets 9,000 x 1/3
3,000 x Rs.200 3,000 24,00,000
Total 9,000 30,00,000

2. Production Budget

Example for Production

It gives the basic information on planning process to preparing for the scenario of process. And it describes the way to handle and allocate financial sources in an effective an efficient manner in order to gain the maximum value in organization’s economical context. As well as budgeting can help an organization use its limited financial resources and human resources in a higher achievable manner on existing organizational opportunities. Since budget is an important tool for financial controlling and resources allocation budgeting acts a major role in every type of an organization from government, larger corporations to small individual businesses. Organizations usually engage in budgeting to determine the most efficient and effective strategies for making money and increasing its

Not only the areas where there is inefficiency or are blockages are recognised, but are developed with the support of alteration analysis and yet motivation corrective activities wherever essential.
Another obvious benefit which is associated with effective budgeting system is it is not just limited to maintaining and improving coordination between departments, but it is also meant for providing a framework for proper management and delegation. It is thus an effective budgetary control system to allow people to participate in the core processes of budget setting thereby creating motivational impact on employees performance. Budgeting helps managers to spend money in areas that are more useful and reduce spending in less useful areas. The benefits of budgeting