Question

how to analysis master budget ? example ?

Answer 1

Master Budget

The master budget is the combination of all budgets produced by a company. It consists of Sales budget., Production budget, direct materials budget, Direct labor budget, Factory overhead budget, Selling and administrative budget, General and administrative expense budget, Cash budget.

Mainly the master budget is divided into operational budget and finanical budget.

The operational budget comprises of Sales Budget, Production Budget, Direct Material Purchases Budget, Direct Labor Budget, Overhead Budget, Selling and Administrative Expenses Budget etc. whereas the financial budget comprises of cash budget, budgeted income statement and budgeted balance sheet.

Analysing the Master Budget

Format and Example for Sales budget for company A

	Quarter1	Quarter 2	Quarter 3	Quarter 4	year
Sales units	2000	3000	2500	4000	11500
x price per unit	$25	$30	$24	$31
Total Sales	$50000	$90000	$60000	$124000	$324000

Here the company deals with only one product and the price is increased from 25 to31.

Production budget example

	Quarter 1	Quarter 2	quarter 3	quarter 4
budgeted sales units	2000	3000	2500	4000
+planned ending units	400	400	400	400
-begining units	1000	300	300	300
Units to be manufactured	1400	3100	2600	4100

Planned ending finished goods at the end of the quarter declined from 1000 to 300 units. Hence the company should the amount of ending finished goods in the later year.

Format for the budgeted income statement

	Amount
Sales Less: Cost of goods sold Gross Margin Less: Selling and administrative expenses Net operating income Less: Interest expenses Net income	(From sales budget) (Ending finished goods inventory) FromSelling and administrative expenses budget) (From Cash budget)

The budgeted income statement works best when presented for all of the budget periods at once, so that it can be very easy to compare the results for the various periods.