Briefly describe the key elements of an operating plan.

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Briefly describe the key elements of an operating plan.

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Briefly describe the key elements of an operating plan.

Explanation & AnswerSolution by a verified expert

Explanation

The key elements of an operating plan are as follows:

Sales forecasting- Sales forecasting helps a firm to plan short term as well as long term operations for production, selling, finance and purchasing  departments and for the overall organisation to meet up the future sales demand.
Cost of Production- Estimated cost of production helps in making production budget, determine the total operating cost and thus the profitability of a business entity, enabling a firm to arrange the funds required for production timely.
Inventories- It helps in determining the need for raw material and finished goods for the upcoming year on the basis of demand of the product in the previous years and other trends in the market.
Other operating items- An operating plan should be made keeping in mind selling, administrative and other expenses as they are an integral part of a business' daily operations.

Verified Answer

Key elements of an operating plan includes:

Sales forecasting- Sales forecasting is a way to estimate a firm's future sales based on its past data and other economic trends.
Cost of production- Cost of production is the overall cost incurred in production which includes cost of labor, raw materials, maintenance and other manufacturing expenses.
Inventory- Inventory includes the stock of raw materials, work in progress and finished goods in possession of a firm at a point of time.
Other operating items- Other operating items include selling, administrative and other expenses incurred by a firm in performing its routine operations.

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