Definition of Operating Budget

Operating budget is the fundamental part of the overall budget which is required to achieve the organizational goals. Operating budget is a budgeting statement for a financial year that focuses on short-term financial management. It includes three parts;

Expense Budget: this outlines the expected budgets during one fiscal year. Expenses are of three types: fixed, variable, and discretionary (expenses whose cost is not determined)

Revenue Budget: this outlines the expected revenue which the company will make from future sales.

Profit Budget: this outlines the gross and net profit company will make by taking out expenses from the revenues. The profit volume will determine the resource allocation, expense control as compared to revenues generated, control unit production and pricing as well assign due responsibilities to managers to play their role in achieving financial goals of the company.