Accounting Dictionary - Letter O
(also called operating budget) is a plan of activities for all normal operations of an entity. The preparation of operating budgets involves cost-volume-profit (CVP) analysis and cost behavior analysis. The first step in preparing an operating budget is to prepare a sales budget. Other budgets that comprise the operational budget include the direct materials budget, direct labor budget, factory overhead budget, ending inventory budget, budgeted income statement, and selling and administrative budget.
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