Master Budget Essay Example | Topics and Well Written Essays - 1000 words

Master Budget - Essay ExampleThe first and foremost ill-treat in developing the master budget is the sales forecast in terms of quantities and values of products. later considering the opening and closing inventory levels, the merchandise quantities are determined which is known as the production budget. The production budget is further divided into the direct materials purchases and usage, direct labor and factory overhead budgets. Likewise the substantiative material and labor, other factory overheads, cost of manufacturing, cost of goods sold, ending inventory of finished goods, selling, administrative and operate expenses are budgeted. Finally, the cash budget is prepared in which cash receipts and disbursements are determined. The process ends with the finale of the Pro Forma Income Statement, Pro Forma Statement of Cash flows and Pro Forma Balance Sheet.Zero based budgeting is a rule of budgeting where all expenditures are justified and every department function is revi ewed comprehensively rather than only gauging the increases. The reasons for adopting a zero based budget are that it results in efficient allocation of resources, it helps detecting inflating budgets, cost impressive ways to improve operations are determined, it increases the staff motivation and provides an initiative for decision making, it is highly reclaimable for departments where the output is not identifiable, it identifies outsourcing opportunities, removes wastage and outdated operations, communication and coordination within the organization becomes more efficient, and the task of cost centers and their family relationship to the overall goals are identified.Question 2Usually a budget also contains non- pecuniary information. This information is apply to explain the financial information, qualify it and divide the financial information into sub information.Types of Non-Financial InformationInformation manage the quality of the resources, quantity of the resource req uired, procedure for calculation and the mechanism is generally included. In some cases the work load on the employees and the human resources required to do the job is often included. This information is used injunction with the financial details and helps to clarify the budget.Calculation of Financial Information using Non-Financial InformationNon-Financial information is used commonly to calculate the financial information. For example the quality of a certain product can be divided into 4 classes and each class is allocated a weightage. The price of the product will be multiplied with the weight down average of the product to give the actual total price. Another example can be the quantity of wood required to manufacture 1000 units of chairs. This will be calculated by first determination the number of planks of wood a truck of tree gives. Then the quality of wood will be quantified to manufacture one unit of chair and finally the total cost will be prime out. Thus non-fin ancial information is usually necessary to calculate financial information.Advantages of Including Non-Financial Information in BudgetsThe benefit of using non-financial information in the budgets is that it makes the employees aware of the goals and objectives expected. These goals are set by using the non-financial inf