From the course: Accounting Foundations: Budgeting

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What a master budget can tell you about your business

What a master budget can tell you about your business

From the course: Accounting Foundations: Budgeting

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What a master budget can tell you about your business

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- Now, let's step back and think at this point about what we know as a result of this budgeting exercise. First, we have estimated the number of boats we will sell this quarter and the next two quarters. Knowing next quarter's sales is important, as we have to build some boats in the first quarter to sell in the second quarter. Second, if we know the number of boats we're going to sell, we can then figure out how many boats we need to make this quarter. Third, once we know how many boats we need to make, we can then start to figure out how much wood for our boats we will need to buy and how many employees we will need to hire to assemble those boats. Fourth, we can also start to anticipate or budget for our overhead expenditures, as well as for what we might spend for selling, general, and administrative expenses. Finally, we've been able to budget our cash inflows and outflows to determine if we're going to have a cash shortfall or a cash excess. All of this was done by being…

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