Master budget components

• include the

»- Sales budget, which reflects units and dollars.

»- Production budget, which adds sales and de¬ sired finished goods ending inventory and subtracts finished goods beginning inventory.

»- Purchases budget, which adds production and desired raw material or component end¬ ing inventory and subtracts raw material or component beginning inventory; purchases quantities are then multiplied by raw mater¬ ial or component costs.

>*- Direct labor budget, which multiples pro¬ duction by standard hours allowed and then by average wage rate.

>- Overhead budget, which adds (variable fac¬ tory OH costs multiplied by the quantity of the cost driver) plus fixed factory OH costs.

>- Selling and administrative budget, which adds (variable nonfactory costs multiplied by the quantity of the cost driver) plus fixed nonfactory costs.

Capital budget, which contains fixed asset purchases and payment points.

>- Cash budget, which reflects all cash received from and spent on items included in the other budgets.

• are combined to prepare pro forma financial statements for management review and assess¬ ment.LO.1