Basic Operating Budget Steps

1. Prepare the revenues budget.

2. Prepare the production budget (in units).
3. Prepare the direct materials usage budget and direct materials purchases budget.
4. Prepare the direct manufacturing labor budget.
5. Prepare the manufacturing overhead costs budget.
6. Prepare the ending inventories budget.
7. Prepare the cost of goods sold budget.
8. Prepare the operating expense (period cost) budget.
9. Prepare the budgeted income statement.
Basic Financial Budget Steps Based on the operating budgets:
1. Prepare the capital expenditures budget.
2. Prepare the cash budget.
3. Prepare the budgeted balance sheet.
4. Prepare the budgeted statement of cash flows.

Master Budget Components

n Operating budget
Supporting budget schedules
Revenue budget

Production budget in units

Direct materials purchase budget

Direct labour budget
Cost of goods sold budget
Non-manufacturing costs budget

Budgeted P&L Account

n Financial budget
Capital budget
Cash budget

Budgeted balance sheet

Budgeted statement of cash flows

n Budgeted sales (units)

+ target closing finished goods stock (units)
opening finished goods stock (units)
= budgeted production (units)