Question

Give an example of a non-financial budget and how it might be useful to management.

Answer 1

An example of a non-financial budget is "Production Budget".

Production budget is highly useful of every manufacturing company, unless the company prepares production budget, it would be unsure of the number of units to be produced, inventory of finished goods to be maintained. If the company is unsure of the finished goods inventory to be maintained it would impact its delivery to customers and might lead to losing its customer due not shortage of inventory and lack of supply within the expected time.

Production budget is also required to control the overall production process of all products a company manufactures. It helps in keeping the required level of finished goods inventory. It helps in optimum production, cost saving, timely delivery to customers, better management, cost control etc.