Question

Distinguish between production budget and material budget.

Answer 1

Production budget contains an estimate of the total volume of production productwise and week or monthwise and a forecast of the closing inventory of finished product. The production budget may be expressed in quantitative or financial units or in both. Production budget is prepared to achieve the following objectives:

1. To answer the following questions:
   1. What is to be produced?
   2. When it is to be produced?
   3. How much it is to be produced?
   4. How it is to be produced?
   5. Where it is to be produced?
2. To plan and organise the production programme for achieving the sales target.
3. To serve as a basis for preparation of production cost budgets, e.g., materials cost budget, labour cost budget, etc.
4. To prepare a cash forecast.

The preparation of materials budget involves the following steps:

1. Estimating the raw material requirements.
2. scheduling the purchases of raw materials m required quantities at the required time.
3. controlling the inventory of raw materials.

Answer 2

S.No.	Basis of Distinction	Production Budget	Material Budget
1.	Purpose	To decide what is to be produced, when, how much and where.	To decide quantity and quality of materials needed.
2.	Contents	Wide scope - contains estimates of all production activities.	Narrow scope - contains estimates of only materials.