Implementation of a companys strategic plan often begins by determining managements basic expectations about future economic, competitive, and technological conditions, and their effects on anticipated goals, both long-term and short-term. Many firms at this stage conduct a situational analysis that involves examining their strengths and weaknesses and the external opportunities available and the threats that they might face from competitors.

After performing the situational analysis, the organization identifies potential strategies that could enable achievement of its goals. Part of this process involves business managers creating budgets to plan for future operations, create benchmarks to measure progress, and maintain necessary accounting controls.

Required:

1. Clearly define and explain the nature of a Master budget and why it is important to prepare such a budget. (5 Marks)
2. Besides preparing the master budget, management accounting is also involved in the role of preparing functional budgets. Among these functional budgets are the Sales, production and cash budget. Discuss the nature of these budgets and 3 factors that need to be considered in preparing these budgets. (15 Marks)