The master budget consists of various sub interrelated budgets. The goal is to deeply think of all areas affecting the business goals and develop a plan of action to meet those goals.
The master budget starts with projecting sales. After sales projections the following sub-budgets are created:
- Production budget: computes how many units should be produced to meet the sales goals
- Raw materials budget: computes how much raw materials should be purchased to produce the number of units calculated in the production budget
- Direct labor budget: Estimates direct labor cost to meet the production goal
- Selling & Admin budget: estimates the expenses needed to meet the sales goal outside of production.
- Income statement: The end product of the budgets described above is the budgeted income statement.
- Cash flow statement: As we know cash flow does not equal profits. This budget estimates expected cash inflow and outflow
Get the module that teaches what you need to know about product cost.
If you an accounting student struggling to understand the concept of product costing, you will find these sets of templates useful.
There are 9 lessons and one test in this module. Topics covered are:
- An introduction to product cost
- An introduction to allocating overhead: ABC versus Traditional
- Job order costing using the traditional method of allocating overhead
- Job order costing using ABC to allocate overhead
- Process costing using the traditional method of allocating overhead
- Process costing using ABC to allocate overhead
- How product cost flows through the financial statement (job order costing)
- How product cost flows through the financial statement (process costing)
- Other uses of ABC
- Test your knowledge: Questions and Answers