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    Overview of Master Budgets: What Is Master Budget?

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    The master budget consists of separate but interdependent budgets that lay out a company's sales, production, and financial goals for a period. It culminates in a cash budget, budgeted income statement, and budgeted balance sheet. The master budget requires numerous estimates and assumptions regarding sales projections, production needs, costs of goods sold, operating expenses, cash flows, and ending balances. It is used to evaluate how planned operations will affect the company's financial performance and position.

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    Overview of Master Budgets: What Is Master Budget?

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    Consumer DigitalProduct
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    The master budget consists of separate but interdependent budgets that lay out a company's sales, production, and financial goals for a period. It culminates in a cash budget, budgeted income statement, and budgeted balance sheet. The master budget requires numerous estimates and assumptions regarding sales projections, production needs, costs of goods sold, operating expenses, cash flows, and ending balances. It is used to evaluate how planned operations will affect the company's financial performance and position.

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    Notes_Lecture 5.2

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    The master budget consists of separate but interdependent budgets that lay out a company's sales, production, and financial goals for a period. It culminates in a cash budget, budgeted income statement, and budgeted balance sheet. The master budget requires numerous estimates and assumptions regarding sales projections, production needs, costs of goods sold, operating expenses, cash flows, and ending balances. It is used to evaluate how planned operations will affect the company's financial performance and position.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    144 views3 pages

    Overview of Master Budgets: What Is Master Budget?

    Uploaded by

    Consumer DigitalProduct
    The master budget consists of separate but interdependent budgets that lay out a company's sales, production, and financial goals for a period. It culminates in a cash budget, budgeted income statement, and budgeted balance sheet. The master budget requires numerous estimates and assumptions regarding sales projections, production needs, costs of goods sold, operating expenses, cash flows, and ending balances. It is used to evaluate how planned operations will affect the company's financial performance and position.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    Overview of Master Budgets

    What is Master Budget?

    The master budget consists of a number of separate but interdependent budgets that
    formally lay out the company’s sales, production, and financial goals. The master budget
    culminates in a cash budget, a budgeted income statement, and a budgeted balance sheet.

    10 Questions

    1) How much sales revenue will we earn?

    2) How much cash will we collect from customers?

    3) How much raw material will we need to purchase?

    4) How much manufacturing costs will we incur?

    5) How much cash will we pay to our suppliers and our direct laborers, and how much
    cash will we pay for manufacturing overhead resources?

    1
    6) What is the total cost that will be transferred from finished goods inventory to cost
    of good sold?

    7) How much selling and administrative expense will we incur and how much cash will
    be pay related to those expenses?

    8) How much money will we borrow from or repay to lenders – including interest?

    9) How much operating income will we earn?

    10) What will our balance sheet look like at the end of the budget period?

    Estimates and Assumptions in Master Budgets

    Sales budget:

    1. What are the budgeted unit sales?

    2. What is the budgeted selling price per unit?

    3. What percentage of accounts receivable will be collected in the current and subsequent
    periods?

    Production budget:

    1. What percentage of next period’s unit sales needs to be maintained in ending finished
    goods inventory?

    Direct materials budget:

    1. How many units of raw material are needed to make one unit of finished goods?

    2. What is the budgeted cost for one unit of raw material?

    3. What percentage of next period’s production needs should be maintained in ending raw
    materials inventory?

    4. What percentage of raw material purchases will be paid in the current and subsequent
    periods?

    2
    Direct labour budget:

    1. How many direct labour-hours are required per unit of finished goods?

    2. What is the budgeted direct labour wage rate per hour?

    Manufacturing overhead budget:

    1. What is the budgeted variable overhead cost per unit of the allocation base?

    2. What is the total budgeted fixed overhead cost per period?

    3. What is the budgeted depreciation expense on factory assets per period?

    Selling and administrative expense budget:

    1. What is the budgeted variable selling and administrative expense per unit sold?

    2. What is the total budgeted fixed selling and administrative expense per period?

    3. What is the budgeted depreciation expense on non-factory assets per period?

    Cash budget:

    1. What is the budgeted minimum cash balance?

    2. What are our estimated expenditures for noncurrent asset purchases and dividends?

    3. What is the estimated interest rates on borrowed funds?

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