1. Master Budget

2. Definition and Role of Budgets
A budget is a quantitative expression for a set of time period
of a proposed future plan of action by management
It can cover both financial and nonfinancial aspects of these
plans and acts as a blueprint for the company to follow in the
upcoming period
Budget
A comprehensive, organizationwide set of budgets
It coordinates all financial projections in the organization’s
individual budgets in a single organizationwide set of budgets
for a set time periods
It embraces the impact of both operating decisions and
financing decisions
Master Budget

3. Budgeting Process
Planning the performance of the organization as a whole as well as its subunits
Considering feedback and changed conditions
Providing a set of expectations against which actual results can be compared
Investigating variations from plans

4. Advantages of Budgets
Budgets are a major feature of most management control systems. When administered intelligently, budgets
compel planning includes the implementation plans
provide performance criteria
Promote communication and coordination within the organization

5. Strategic Analysis in the Formulation of Long-Run and Short-Run Budgets
Long-Run Planning
Long-Run Budgets
Strategy Analysis
Short-Run Planning
Short-Run Budgets

6. Periodic Budget and Rolling Budget
A budget prepared for a specified period of time, usually one year. As each budget period ends, the organization prepares a new budget for the next one.
Rolling Budget
A budget or plan that is always available for a specified future period by adding a month, quarter, or year in the future as the month, quarter, or year just ended is dropped .

7. Budget Practices Around the Globe
S U R V E Y S OF C O M P A N Y P R A C T I C E
Budget Practices Around the Globe
1. Percentage of firms that prepare
a complete master budget
91%
78% 1 2 3
93%
67% 3 2 1
95% -
100% -
100%
82% -
2. Percentage of firms reporting
division manager participation
in budget committee discussions
3. Ranking of the most important
budget goals for division
manager (1=most important)
Return on investment
Operating income
Sales revenues

8. Operating Budget and Financial Budget
Budgeted income statement and its supporting budget schedules.
Financial Budget
The part of master budget that comprises the capital budget, cash budget, budgeted balance sheet, and budgeted statement of cash flows.

9. Steps in Preparing an Operating Budget
Step 1 : Revenue Budget
Step 2 : Production Budget (in Units)
Step 3 : Direct Materials Usage and Purchases Budget
Step 4 : Direct Manufacturing Labor Budget
Step 5 : Manufacturing Overhead Budget
Step 6 : Ending Inventory Budget
Step 7 : Cost of Goods Sold Budget
Step 8 : Other(Nonproduction) Costs Budget
Step 9 : Budgeted Income Statement

10. Overview of the Master Budget for Halifax Engineering