Page 88 - Budgeting for Managers

Creating a Production Budget
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assign a portion of total corporate overhead to your department.
Of course, exact procedures and methods will vary at differ-
ent companies. It’s always good to check with and learn from
your accounting department. But this chapter has given you the
basics you need to create a production budget for your business
and helped you learn the accounting terms and ideas most use-
ful to you as a manager.
Manager’s Checklist for Chapter 4
❏ Numbers come from decisions and actions, not from other
numbers.
❏ Use past figures as a guide to what has happened in the
past. Figure out (or decide) what will happen in the future
and generate your numbers from your plan.
❏ Income is usually harder to estimate than expenses. Your
income is based on decisions your customers make and is
largely outside your control. Your expenses are based on
decisions you make and are more under your control.
❏ Be careful using percentages in your estimation process.
Use them only when there is sound thinking behind the
percentages. Even in those cases, look for other factors
that may change your estimates.
❏ Work in the details. Split line items if you need to. Look at
each line item from several viewpoints. At a larger level,
build the budget in several pieces and then put it together.
❏ If you’re responsible for inventory, take the time to learn it
well. Learn from experts at your company who can tell you
how it’s done there. Keep in mind the difference between
physical inventory and book inventory.
❏ Use the method for building a manufacturing budget any
time you’re putting together a budget for manufacturing or
assembly or trying to calculate cost of goods sold.