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Chapter 22: Q8RQ (page 1228)

In a manufacturing company, what are the three types of budgets included in the master budget? Describe each type.

Short Answer

Expert verified

The master budget includes the operating, capital, andfinancial budgets.

Step by step solution

01

Meaning of Master Budget 

A budget that shows the overall planning of the economic activities from the lower to the top level is known as the master budget. It gives the strategic path to accomplish all the goals and objectives of the company effectively and efficiently.

02

Explanation

  1. The operating budget: The operating budget is the set of operating activities of the business, such as sales revenue, cost of goods sold, and selling and administrative expenses.
  2. The capital expenditure budget: The budget plan is related to purchasing property, plants, equipment, and other long-term assets.
  3. The financial budget: A budget that includes a cash budget and budgeted financial statements is a financial budget.

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Most popular questions from this chapter

11. Kendall Company projects 2019 first quarter sales to be $10,000 and increase by 5% per quarter. Determine the projected sales for 2019 by quarter and in total. Round answers to the nearest dollar.

12. Friedman Company manufactures and sells bicycles. A popular model is the XC. The company expects to sell 1,500 XCs in 2018 and 1,800 XCs in 2019. At the beginning of 2018, Friedman has 350 XCs in Finished Goods Inventory and desires to have 10% of the next year鈥檚 sales available at the end of the year. How many XCs will Friedman need to produce in 2018?

Preparing a financial budget鈥攕chedule of cash receipts

Victors expects total sales of \(702,000 for January and \)349,000 for February. Assume that Victor'ssales are collected as follows:

50% in the month of the sale

30% in the month after the sale

16% two months after the sale

4% never collected

November sales totaled \(388,000, and December sales were \)407,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.

Describing master budget components

Sarah Edwards, division manager for Pillows Plus, is speaking to the controller, Diana Rothman, about the budgeting process. Sarah states, 鈥淚鈥檓 not an accountant, so can you explain the three main parts of the master budget to me and tell me their purpose?鈥� Answer Sarah鈥檚 question.

Preparing an operating budget鈥攕ales budget

Yarbrough Company manufactures T-shirts printed with tourist destination logos. The following table shows sales prices and projected sales volume for the summer months:

Projected Sales in Units T-Shirt Sizes Sales Price June July August Youth $ 7 575 500 525 Adult鈥攔egular 17 625 900 825 Adult鈥攐versized 18 400 500 475 Prepare a sales budget for Yarbrough Company for the three months.

What is a master budget?
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