From the course: Accounting Foundations: Managerial Accounting
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Budgeting for a manufacturing organization
From the course: Accounting Foundations: Managerial Accounting
Budgeting for a manufacturing organization
- The master budget is the most detailed and most heavily used budget in an organization. This budget is an integrated group of detailed budgets that together constitute the overall operating and financing plans for a specific time period. In a manufacturing firm, the master budget begins with a forecast of sales, is followed by a detailed budget for the production, selling, administrative and financial activities, and culminates in a set of pro forma or budgeted financial statements. Notice that the budgeting process is based on long term strategic and short term operational plans established by top management. Formalized budgeting activity forces management to make many important decisions that guide a company towards its goals. Decisions involving scheduling, pricing, borrowing, investing and cost control. Now the first step in developing a master budget is to prepare a sales budget. As shown in our master budget…
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