Question

Which factors are taken into consideration while preparing production budget?

Options

• The estimate of the number of units to be produced during the budget period.

• Estimate the cost of indirect labour, indirect materials, indirect expenses.

• Determining the future cash requirements of the firm.

• Planning for financing of the cash requirements

Answer 1

The estimate of the number of units to be produced during the budget period.

Explanation:

A production budget primarily estimates the number of units to be produced during the budget period (based on the sales forecast and desired inventory levels). Indirect costs and cash/financing are covered by overhead and cash/financial budgets.