Budgets Matrix

CheckPoint: Budgets Matrix

Use Appendix C to define each of the types of budgets listed and describe their uses.
Post Appendix C as an attachment.

Axia College Material

Appendix C

Budgets Matrix

Directions: Using the matrix, define each of the budgets listed and briefly describe its uses.

Budget	Definition	Describe its uses
Sales budget	The sales budget is derived from the sales forecast. It is management’s best estimate of sales revenue for the budget period. An inaccurate sales budget can adversely affect net income. Each of the other budgets depends on the sales budget.	A sales budget is used to forecast anticipated sales volumes
Production budget	The production budget shows the units that must be produced to meet anticipated sales.	A production budget is used to determine the number of units that has to be produced to meet predicted sales and inventory requirements
Direct materials budget	The direct materials budget shows both the quantity and cost of direct materials to be purchased.	A direct materials budget is used to estimate the amount of raw materials that need to be purchased during a specific period of time.
Direct labor budget	The direct labor budget contains the quantity or hours and cost of direct labor necessary to meet production requirements.	A direct labor budget is used to determine how many labor hours are needed to meet the expected production volume during a specific period of time.
Manufacturing overhead budget	The manufacturing overhead budget shows the expected manufacturing overhead costs for the budget period.	A manufacturing overhead budget is used to provide an estimate of the overhead costs that could be made during a specific period of time.
Selling and administrative expense budget	The selling and administrative expense budget projects anticipated selling and administrative expenses for the budget period. In this budget, as in the preceding one, expenses are classified as either variable or fixed.	A selling and administrative budget is used to plan for selling and administrative costs.
Budgeted income statement	The budgeted income statement is the important end-product of the operating budgets. This budget indicates the expected profitability of operations for the budget period. The budgeted income statement provides the basis for evaluating company performance.	A budgeted income statement is used to project net income or loss and federal taxes.
Cash budget	The cash budget shows anticipated cash flows. This budget is considered to be the most important output in preparing financial budgets. The cash budget contains three sections; cash receipts, cash disbursements, and financing and the beginning and ending cash balances.	A cash budget is used to determine your business’ cash flow incoming and outgoing and the short term credit needs.