The Master Budget and Its Components: Cowan Pottery in Focus

The Master Budget and Its Components: Cowan Pottery in Focus

Budgeting is one thing that should not be taken lightly in a business entity. This is because it ensures that there is a good benchmark against which the business entities’ performance may be gauged against. The master budget is usually a product of individual budgets concerned with things such as the sales, purchases, operating expenses, capital and cash of a business entity (Donovan, 2005). A manufacturing company such as Cowan Pottery in the United States is supposed to prepare a master budget.

Each of the individual budgets for Cowan Pottery has to contain items as indicated below.

Sales Budget

The sales budget is one of the crucial individual parts of the master budget. Some of the items included in the sales budget include, expected total sales unit, price per unit and total sales in revenue. There is also the inclusion of expected sales growth in the budget.

Purchases Budget

The purchases budget puts into consideration the material requirements for production, the cost of unit of material, closing and opening stock for the budget period

Operating expenses Budget

This type of budget would contain the operating expenses; expected and the increase in level. The operating expenses possible at Cowan pottery would include those associated with maintenance of pottery equipment and printing expenses.

Capital Budgets

In the preparation of the capital budget, the items involved are concerned with the flow of money in the company. The company’s cash inflows and cash out flows forms part of the items in capital budgets. This also includes the real estate, equipment and other potential assets of the company. It aims at showing the weight of the company.

Cash Budgets
Cash budget of Cowan Pottery would contain the time period, desired cash position and estimated sales and expenses. This would be in an effort to show the company’s general cash position at a given time.

 

 

 

References

Donovan, Sandy (2005). Budgeting, Lerner Publications.

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