Question

What is a master budget and how the sales forecast use as the starting point in budgeting?

Answer 1

The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, and also includes budgeted financial statements, a cash forecast, and a financing plan. The master budget is typically presented in either a monthly or quarterly format, and usually covers a company's entire fiscal year. An explanatory text may be included with the master budget, which explains the company's strategic direction, how the master budget will assist in accomplishing specific goals, and the management actions needed to achieve the budget. There may also be a discussion of the headcount changes that are required to achieve the budget.A master budget is the central planning tool that a management team uses to direct the activities of a corporation.Usually, firm's produce a master budget yearly. The one year budget planning document encompasses all other budgets, it coincides with the fiscal year and can be split into quarters and further, into months.

Preparation of the master budget starts with a sales budget. The sales budget guides the rest of the budgeting process.all other budgets are depending the sales budget.once the sales forecast is completed then the company can budget how much they want to produce,then based on the production budget company can budget how many meterials,labour,and other resources they need for production.all these budgets are inter connected and sales forecast is the starting point.with out a sales forecast, we can`t make other budgets properly