What is master budget?

A master budget is a comprehensive financial plan that outlines a company's projected income, expenses, and cash flows for a specified period, typically one year. It includes all operational and financial activities and covers all functional areas of the organization, including sales, production, marketing, human resources, and finance.

The master budget serves as a blueprint for the company's overall financial performance, guiding its strategic decisions and future growth. It allows management to anticipate and plan for potential challenges and opportunities, identify areas where cost savings can be made, and prioritize resource allocation.

A typical master budget consists of several budgets, including:

• Sales budget
• Production budget
• Direct materials budget
• Direct labor budget
• Overhead budget
• Selling and administrative expenses budget
• Cash budget
• Budgeted income statement
• Budgeted balance sheet

The master budget is typically created through a collaborative effort between different departments and stakeholders within the organization. Once finalized, it is reviewed, approved, and used as a tool for monitoring and controlling the company's financial performance throughout the year.