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10 - Budgetary Planning Cheat Sheet (DRAFT) by

Budgeting Basics and the Master Budget

This is a draft cheat sheet. It is a work in progress and is not finished yet.

Budgeting Basics

Not a substitute for management
Formal written statement of manage­ment's plan
Requires to plan ahead
Need for defined authority and respon­sib­ility
Way to commun­icate objectives to all the company
Creates early warning for issues
Research and Analysis help create realistic goals
Tools to promote efficiency and discourage waste
Facili­tates coordi­nation
Must be accepted by all
Basis for perfor­mance evaluation
Motivates employees

Budgeting Process

Sales Forecast
- Include potential sales for industry
- Consider economy, techno­logy, market, advert­ising
- Assigned to budget committee
- Can aspire additional effort
- Each level of management should partic­ipate
Partic­ipative Budgeting
- Bottom-up approach
- To produce a fair and achievable budget
- Process seen as more fair
- Can be costly and time consuming

Master Budget

Set of interr­elated budgets that constitute a plan of action
Contains 2 catego­ries:
Operating Budgets
Individual budgets that prepare income statement

Financial Budgets
- Budgets that focus on cash needs
- Uses inform­ation from operating budgets

Operat­ing­/Fi­nancial Budget


Operating Budget

Sequence of Budget Prepar­ation
1. Sales Budget
2. Production Budget
3. DM - DL - MOH budgets

4. S&A Expense Budget
5. Budgeted Income Statement

Sales Budget

Expected Unit Sales Volume x Antici­pated Unit Selling Price
Drives all other Operating Budgets

Production Budget

Required Prod. = Expected Sales Units + Desired End. FG - Beg. FG
Only includes units

DM Budget

Units of DM to meet production and inventory
- Units to produce x DM Unit
DM to be purchased
- DM Unit required + Desired End. DM - Beg. DM
Cost of DM to be purchased
- DM Unit to purchase x Cost per DM Unit

DL Budget

Total DL Cost = Units to be produced x DL Hours per Unit x DL cost per hour