Explain production budget

Question

Give a short introduction of the term ‘production budget’?

Answer 1

Production budget is a prediction of production for the budget period. It is made from two angles: In terms of money and in terms of quantity. Following budgets are made under the production budget are illustrated below:

-Material Budget to approximation of the material cost
-Direct Labor Cost Budget to estimation of the labor cost that is required to product the quantity as particular in the production budget.
-Overhead Budget to estimation of production overheads.

Production budget is made after taking different budgets into deliberation. For an appropriate estimation of different costs associated with the production procedure makes it vital to make production budget for the period in that production will take place.