From the course: Accounting Foundations: Managerial Accounting
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Budgeting for a service organization
From the course: Accounting Foundations: Managerial Accounting
Budgeting for a service organization
- Each year, service companies are becoming a larger and larger percentage of the businesses in the United States. Service companies differ from manufacturing and merchandising companies in that they provide services to customers instead of products. As was the case with both manufacturing and merchandising companies, the budgeting process for a service firm begins with a sales budget. The service firm does not require a production budget. Service firms sell intangible products, like doctor's appointments, car repairs, room rentals, or monthly internet access. These things can't be inventoried. Therefore, the sales volume determined in the sales budget is the production for the operating period. The sales budget will establish the expected production, or the number of intangible products expected to be sold each period. The sales budget will then be used to determine the supplies, wages and salaries, overhead, and selling and administrative budgets. Again, we say supplies budget…
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