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forecasting operating budgets starts from sales budget and followed by production budget, direct materials budget, purchase budget, cost of materials required for production, Direct labor budget and the factory overhead budget are the most necessary steps required in forecasting operating budget
Operating budget starts with Sales Budget. Sales Budget depends on sales forecast which starts with historical trend, economic and industry conditions, rising cost,policies on pricing and extending credit, the amount of advertising and marketing expenditures, number of unfilled back orders.
Sales forecast should use statistical analysis such as regression analysis and time series analysis and also market expectations and customer's need.
Operating Budgets are Forecasted Normally in two ways.
1 Through Trend analysis
2 Relation with Sales Budgets.
