Operational (Operating) Budget

One that embraces the impacts of operating decisions. It contains forecasts of sales, net income, the cost of goods sold, selling and administrative expenses, and other expenses. The cornerstone of an operational budget is forecasted sales. Therefore, the Sales Budget is the basic building block for the operational budget. Once the sales budget is prepared, then the Production Budget can be formulated. The operational budget also consists of the ending inventory budget, direct material budget, direct labor budget, factory overhead budget, selling and administrative budget, and budgeted income statement.