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Some of the factors that can critically affect your Materials Budget:
- Production Budget should be considered the foremost factor in preparing such budget.
- Material cost is also equally important. You may like to consider purchasing the material only when its prices are lowest.
- There are certain materials that are prone to seasonal fluctuations. And therefore, it is recommended to procure them only when they are readily available in the market.
- The store position and the stock of existing material are also key considerations. If your business does not have ample space, you should not be buying the stock in advance.
- Management policy, rules and regulations on JIT (Just-In-Time) inventory, inventory level fixation and EOQ (Equal Order Quantity) are also major influencers to materials budgeting.
- Past policies of the business and that of the competitors’ should also be considered while you prepare the Materials Budget.
- At times, you may also need to consider the fresh stock or easily availability of stock materials.
- Transport costs are very crucial again. If the materials are not available easily, the management needs to consider sufficient quantity of raw materials for purchase and thus, transport costs can be minimized.
Other factors, such as cash/credit availability, conditions of vendors, etc should also be taken into account, while preparing Materials Budget.
