Reference no: EM132502000

Question 1: How to prepare the budget schedules that make up a master budget.

• (Sofiane Naitsidenas) A business has multiple business units, sales, production, inventory, finance, human resources and so on. Each business unit has its own budgets such as a budget for direct materials, direct labor, manufacturing overhead, sales, production, capital acquisitions and so on. all these budgets combined they form a master budget.

• The sales budget always comes first because an estimate of future sales determines the quantity that needs to be produced. The production budget is developed after the sales budge, then the manufacturing budget which consists of direct labor, direct material, and manufacturing overhead is prepared. In addition, business units must prepare, selling and administrative expenses budget, budgeted income statement, capital acquisition budget, a cash budget, and a budgeted balance sheet. All these budgets must reviewed and can be approved or rejected by the budget committee.