Running head: MASTER BUDGETS

Master Budgets
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MASTER BUDGETS

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Master budgets

A budget is a detailed plan outlining acquisition and use of financial and other resources
over a period of time. Budgets are important in every organization since its through them that
the organization is able to control cost, evaluate performance and form a basis for decision
making thus achieve its objective. A master budget is the most important and is the overall
quantification of the budgeting plan which combines all the budgets of all departments in the
organization (Merchant and Van der Stede).
The master budget comprises of two main sections; operational and financial budget.
First, operational budget is an integration of sales budget, production budget, direct material
purchase budget, overhead budget, direct labor budget, selling and administrative budget and
cost of goods manufactured budget. Second, financial budget includes the cash budget, budgeted
income statement and budgeted balance sheet ("Asset Page").
Preparing the master budget basically involves preparing all the budgets. However, some
budgets have to be prepared before there other in the following steps.

The sales budget.

This is estimate expected sales of the company calculated by adding sales during the year
and required ending stock less sales.
Production budget.
Direct material purchase budget.
It is estimating quantities and costs needed for the output demand by production
department

Direct labor budget.

MASTER BUDGETS
Its the number of labor hours required to meet production needs calculated by
multiplying the number of hours per unit by standard wage per hour and the total no of

units.
Factory overhead budget.
It is the total cost incurred other than direct cost.
Cost of goods manufactured budget
Selling and administration budget.
It estimating all the cost incurred in selling and distribution of company product.
Cash budget.
It is an estimate of all the cash inflow and outflow from the figures obtained from the
expense and sales budgets as well as the opening cash balance
Budgeted income statement
It is combining the prior income statement with the output of the functional budgeting.
Budgeted balance sheet.

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Refrences

"Asset Page". Class.ctuonline.edu. N.p., 2016. Web. 13 Sept. 2016.

Merchant, Kenneth A and Wim A Van der Stede. Management Control
Systems. Harlow, England: Financial Times/Prentice Hall, 2012. Print.