Building an Operating Budget

Overview/Description
 Learners will be able to identify the components of an operating budget and how it works. They will recognize the value of mini-budgets in the construction of an operating budget. In effect, learners will recognize the value of bottom-up budgeting and will be able to apply the principles of break-even analysis to the construction of operating budgets.

Target Audience
 Every manager with budgeting or capital investment evaluation responsibilities

Expected Duration
3.5 hours

Lesson Objectives:

Understanding the Operating Budget

  • recognize the value of understanding the basics of an operating budget.
  • classify costs as direct or fixed costs.
  • derive the values for the components of an operating budget.
  • select the most appropriate method of market analysis to obtain relevant information for a given business situation.
  • determine the revenue in a given business scenario.

    • Mini-budgets

  • recognize the value of mini-budgets in developing a successful operating budget.
  • interpret the data in a given production budget.
  • determine the total cost of material to be purchased using the materials budget and the inventory schedule.
  • interpret the data in a given labor budget.
  • complete the given fixed direct expenses budget by computing the values of the missing elements.

    • The Budget Decision

  • recognize the importance of "bottom-up" budgeting.
  • complete the given administrative budget by computing the values of the missing elements.
  • determine the break-even revenue in a given business scenario.
  • determine the profit revenue level by using the bottom-up approach.

    • Course Number: FIN0262