1. Explain how operating budgets are prepared. 2. Explain the importance of preparing an operating budget.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
1. Explain how operating budgets are prepared.
2. Explain the importance of preparing an operating budget.
Operating Budget:
The budget created to plan all of an organization's operational activities for a specific time period is known as the operating budget. The budget for selling and administrative costs is comprised of the budgets for sales, production, raw materials, direct labor, manufacturing overhead, and selling.
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