The master budget includes individual budgets for sales, production or purchases

Question

The master budget includes individual budgets for sales, production or purchases, various expenses, capital expenditures, and cash. Part of the budgeting process is summarizing the financial statement effects on the budgeted income statement and the budgeted balance sheet. A master budget refers to a company's sales budget that includes all of its segments or departments. Traditional budgeting is generally better than activity-based budgeting when attempting to reduce costs by eliminating non-value-added activities. The sales budget is derived from the production budget. A capital expenditures budget is prepared before the operating budgets. The selling expenses budget is normally prepared before the sales budget because selling expenses affect the amount of sales. Pan of the cash budget is based on information taken from the capital expenditures budget. A cash budget shows the expected cash receipts and cash expenditures during the budget period. The budgeted balance sheet is prepared primarily from data contained in the previously prepared components of the master budget. Production budgets always show both budgeted units of product and total costs for the budgeted units. The manufacturing budgets include the sales budget and the budgeted income statement.

Explanation / Answer

84) True. The master budget is the aggregation of all lower-level budgets produced by a company's various functional areas, and also includes budgeted financial statements, a cash forecast, and a financing plan.

85. FALSE 86. FALSE 87. FALSE 88. FALSE 89. TRUE

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