ECONOMICS

Detailed explanation-1: -Direct Material Budget: Determines the quantity of direct raw materials that must be purchased each period to meet anticipated production needs (from the production budget) and to provide for adequate levels of direct raw materials inventories. Remember that raw materials inventory may also include indirect materials.

Detailed explanation-2: -Flexible budget is also called variable budget. In a flexible budget provisions are made to modify the budgeted cost and revenue for any level of activity of the firm’s operations. So a flexible budget prepared for one level of activity can be altered for any level of activity.

Detailed explanation-3: -The Use of the Master Budget The master budget summarizes projected activity by way of a cash budget, budgeted income statement and budgeted balance sheet. Most master budgets include interrelated budgets from the various departments. Managers typically use these subset budgets to plan and set performance objectives.

Detailed explanation-4: -Master Budget: Once all the functional budgets are created, then the financial officer will prepare a master budget. It is an integrated budget that reflects the estimated profit and loss and financial position using Budgeted Profit & Loss Account and Budgeted Balance Sheet of the concern.