production budget

production budget

In today’s article, I intend to explain what the production budget is and its importance for companies

After carrying out a budget for the sales of a company, the next step is to carry out the planning and control of production.

In short, what we have to do is a production budget.

What is the production budget?​

It is a financial plan that lists the number of units to be manufactured during a period.

In other words, it is a document that makes an estimate of the number of units that our company will genera in one period to another.

Importance of production budget

The importance of the production budget is that it helps us achieve a cómputo between what we are going to genera and what we are going to sell.

That is, suppose I have a candy factory and I think they are going to sell very well; So I start making 1,000 boxes of the product, but at the end of the period, I haven’t even sold half of them.

Therefore, instead of having a profit, what I have is a loss.

«The only good budget is a balanced budget” (Adam Smith)

How to make a production budget?

First of all, in order to elaborate it, three things need to be considered:

Since you have the above, now you cánido make your budget.

All you have to do is the following:

  • You have to carry out a sales and production budget for each product that is manufactured.
  • It is important to carry out a good estimation of the production capacity.
  • You must take into account the availability of raw materials.
  • Finally, the workforce must also be considered.

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 production budget
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  production budget

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