Functional budget
A functional budget plans a particular activity or resource area, such as sales, production, materials, labour or overhead. The budgets are interdependent and should use consistent volume, timing and price assumptions. Together with financing and other plans, they feed into the master budget. Assign responsibility for preparation and explain the principal constraint so a function does not submit an internally plausible plan that cannot be delivered by the whole business.
Worked example
A higher sales plan increases production, which raises material usage and labour hours; those changes must flow into purchases and cash rather than remaining only in the sales spreadsheet.
Common mistake
Do not treat each function’s plan as independent or add budget totals that count the same internal movement twice.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Supporting | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |