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The Master Budget Process
The Master Budget Process
The Master Budget Process
MASTER BUDGET PROCESS
1. Annual Profit Plan
a. The master budget, also called the comprehensive budget or annual profit plan, encompasses the organization's
operating and financial plans for a specified period (ordinarily a year or single operating cycle).
b. The importance of carefully drafting the budget calendar is illustrated here. The information contained in the
lower‐numbered budgets feeds the higher‐numbered budgets.
For example, the production budget cannot be prepared until after the sales budget. The direct materials
budget and the direct labor budget cannot be prepared until after the production budget had been
completed.
2. Operating Budget
In the operating budget, the emphasis is on obtaining and using current resources.
1) Sales budget
2) Production budget
3) Direct materials budget
4) Direct labor budget
5) Manufacturing overhead budget
6) Ending finished goods inventory budget
7) Cost of goods sold budget
8) Nonmanufacturing budget
i) Research and development budget
ii) Design budget
iii) Marketing budget
iv) Distribution budget
v) Customer service budget
vi) Administrative budget
9) Pro forma income statement
3. Financial Budget
a. In the financial budget, the emphasis is on obtaining the funds needed to purchase operating assets. It contains
the
1) Capital budget (completed before operating budget is begun)
2) Projected cash disbursement schedule
3) Projected cash collection schedule
4) Cash budget
5) Pro forma balance sheet
6) Pro forma statement of cash flows