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Number the following steps in forming a master budget in the correct order: _ Create master budget _ Create long-term plans _ Create short-term plans _ Analyze the internal and external environment _ Form strategic goals
- Add up all fixed budget costs like advertising, employee salaries, etc.- v
- Add up all flexible costs like factory overheads, material, etc.
- Add up cushion for excesses (say10% of flexible totals but it depends from business to business)
- Combine together fixed budget cost, flexible budget costs and cushion cost
- Trim any components if necessary. If your master budget exceeds your expectations, or your company's ability to make a profit, you may need to trim some of the expenses your company will incur
These steps involves creating budget strategies, and it might be numbered as follows :1- Analyze the internal and external environment.
2- Form strategic goals.
3- Create long-term plans.
4- Create short-term plans.
5- Create master budget.
But if we are to consider the financial side of budget formulation it might be like so:
1- Analyze historic data on revenues and expenditures.
2- Preform revenues estimations.
3- Preform expenditures estimations ( for both capital and O&M budget).
4- Draft the annual budget.
5- Discuss and review the draft budget by management.
6- Approve the budget.
