CMA Part 1 Chapter 3

gaurav.alagh1
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CMA Part 1 Chapter 3

Postby gaurav.alagh1 » Tue May 09, 2017 10:49 am

What is the difference between static budget and master budget ??
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edupristine
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Re: CMA Part 1 Chapter 3

Postby edupristine » Thu Jun 01, 2017 8:46 am

In a static budget, the budget does not change with the change in the sales volume of the company. Whereas, the master budget is a set of interconnected budgets be it sales, production costs, purchase etc. A master budget is the main tool used in planning and control to the management since it helps them to plan the business activities in a better manner according to the same.

For example, If a company's annual master budget is a static budget, the budget for sales commissions expense will be one amount such as $200,000 for the year. In other words, in a static budget, the budgeted amount for sales commissions expense will remain at $200,000 even if the actual sales during the year are $3 million, $4 million or $5 million.


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