Sub-Budget

Sales budget

Sales budget is an itemization of a company's sales expectations for the budgeted period, in both units and value. If a company has a huge product line than it usually aggregates its expected sales into a smaller number of product categories or geographic regions; otherwise, it becomes too difficult to generate sales estimates for sales budget.

Forecasted unit sales	15,000
x Price per unit	$100
Total gross sales	$1,500,000
- Sales discounts & allowances	$50,000
-Sales returns	$50,000
= Total net sales	$1,400,000

It is extremely important to prepare the sales budget more accurately, as most of the sub budget uses the forecasting of the sales. Therefore, if the sales budget is inaccurate, then same will be with other budgets that use sales budget as source material.

Production budget

Production budget something which is being prepared to calculate the number of unit that should be manufactured. It is combination of sales forecast and closing inventory of finished goods. We take closing inventory to cope with the unexpected demand increase. Production budget is typically presented monthly, quarterly format.

Product to be manufactured= Forecasted sales + Closing Inventory – Opening Inventory

Forecasted unit sales	15,000
Closing Inventory	5,000
Total unit required	20,000
- Opening Inventory	2,000
=Product to be manufactured	18,000