Operating Budget

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on June 08, 2023

Parts of the Operating Budget

The operating budget consists of two parts:

  • Program budget
  • Responsibility budget

Both budgets arrive at the same figure for projected net income and return on investment. An overview of each one is given below.

Program Budget

The program budget describes the major programs that the company plans to undertake.

This budget is arranged by product line and shows the anticipated revenue and costs for each product. This budget helps to answer questions such as:

  • Is production capacity sufficient to support the organization's sales?
  • What can the company afford to spend on research?
  • Are adequate funds available?

If there are negative answers to any of these questions, the plan needs revising.

Responsibility Budget

The responsibility budget sets out budget information by responsibility areas. It is, therefore, a control device (i.e., a statement of standard performance against which actual performance can be compared).

The costs in a responsibility center will vary with volume. The responsibility budget shows the expected costs at various levels of volume.

Also, responsibility budgets are prepared for a variety of other special purposes.

Operating Budget FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.