Step 1: Cost centres are analysed on the basis of organisational structure of the organisation.
Sub Department (i.e Sub Committe) will report thier Cost related data to deprtment head (i.e. Budget committee)
Step 2: On the basis of data flowing from lower level deptartment to upper level dept., these Budget are presented to Cost managers in Committe meeting, the Cost & management accountant will prepare the Flexible Budget of each Cost Centres at different normal capacitis of Production considering the behaviour of cost(i.e. Variable cost, Fixed Cost, semi variable cost).
Step3: Prepare the Budget manual i.e. incorporate infos relating to flexible budget into a book called budget manual.
Step4: Identify Principal Budgeting Factor (for ex: Machine Dept. say max production will be 1000 units but Sales Dept says that max to max 900 units can be sold, so here Sales is the PBF and Performance evaluation will be conducted by comparing PBF of 900 with actual.
Step5:Prepare Functional Budget i.e. the budget is to be followed for each & every responsible manager. For ex; For Sales dept. Cost Centre & Revenue centre will control their cost at 900 units level.
Functional Budget Includes: Production Budget, Material Budget,Labour Budget,Expenses & OHs Budget, Cap exp Budget.
Step6: Prepare Master Budget: which includes:
a) Cash Budget or Projected Cash Flow Statement
b) Projected Profit & Loss A./c
c) Projected Balance Sheet.
After these Budget Procedures, Pricing Decisons(using various techniques like Absorption, marginal,Relevant costing,etc),Cost Reduction, Performance Evaluation,etc will be conducted in order to achive mgmt objectives.
Now my dear jafer, think which type of budget r u talking about.
If u talking about the main Budgeted data which are supplied by lower level depts. to Budget committee,(flowing from Sub Committe to Main Budget Committe) then u have to consult a professional who had worked or presently working in a manufaturing industry as becoz only practical exposure can clear these doubts.
I have tried my level best to give a basic idea ( bird eye view)..so that u can now undertsnd the concepts of how cost is being controlled in a mfg co through Budgets..