This unit has focused on manufacturing companies; however, many companies are service operations

that do not sell a physical product. For this portfolio assignment, select a service company and
describe the process it would use to create a master budget (refer to Figure 9.1 of the text). How
would the budget process for the service company differ from a manufacturing company? Be specific.
As portfolio activities are to be self-reflective, please make sure to connect the portfolio assignment to:

 Personal experiences. Reflect on how this assignment topic is applicable to and will benefit
you.
 Course readings and any external readings.
 Discussion forum posts or other course objectives.

The Portfolio Activity entry should be a minimum of 500 words and not more than 750 words. Use APA
citations and references if you use ideas from the readings or other sources.
This assignment will be assessed using the Portfolio rubric.

The Master Budget

A master budget is a series of budget schedules outlining the business’s plans for the upcoming
months, quarter and year. It is an expensive business strategy which records the upcoming sales,
productions levels, purchases, selling and administrative expenses and capital expenditures. It
contains all financial budgets, budgeted income statement and balance sheet. Furthermore, it is used
by business management to make strategic decisions about their current year forecasting and long-
term strategy (“What is a Master…..,” 2019).

Allianz
Allianz is one of the biggest financial services company in the world, and they have more than
147,000 employees in 70 countries and more than 85 million clients worldwide. Allianz offers various
financial services like active asset management or innovative solutions to help grow and protect
income in retirement (“Allianz…,” n.d.).

In the case of Allianz, the process of preparing a master budget compare to a manufacturing
organization will be same, but the process varies mostly in the types of operating budgets that each
type of organization makes. For instance. the operating budgets of a manufacturing organization
contain:
• budgets for sales
• production
• direct materials purchases
• direct labor
• overhead
• selling and administrative expenses,

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 • cost of goods manufactured.

The Allianz´ or a service company operating budgets contain:

• budgets for service revenue
• labor
• overhead
• selling and administrative expenses.

Furthermore, it is important to note that the operating budgets are interrelated and must be prepared in
a certain order. Operating budget preparation is a shared responsibility between the various manager
from the sales department, finance Department, department manager and division manager. Each of
these managers plays an important role in the budgeted income statement. Furthermore, the budget
committee which is made from a group within the organization is responsible for the supervision and
approving the master budget (“Prepare Operating Budgets...,” n.d.).

The service revenue budget is prepared first in companies like Allianz because this budget is used to
evaluate sales volume and revenues. Service company like Allianz also need to prepare budgets. But,
Allianz or other service companies are focusing on their direct labor budgets because direct labor
regularly covers most of their expenses. For instance, hiring too many workers can have a negative
effect on profits and understaffing will lead to overtime work. In both cases, the direct labor budget
feeds right into the cash budget and the budgeted income statement. Furthermore, service companies
typically have no need for production or overhead budgets. The focus of these companies is on the
quality of services and on the labor force resources that need to be available for customers
continuously.

In the manufacturing companies, the sale budget will be prepared first, because a sales budget is a
detailed plan that identifies the total sales expected in a specific period. To determine total budgeted
sales, the company must estimate both a selling price and the sales volume. The estimated sales
volume will affect the level of operating activities and resources needed for operations
(“Budgeting……,” n.d.).

In conclusion, it is important for managers to have an understanding of the number of products or

services that need to be sold and how many sales dollars to expect because this information will help
them to develop budgets that will empower them to manage their companies’ resources accordingly
that they generate profits.

References
Allianz USA | About Us. (n.d.). Retrieved March 5, 2020, from www.allianzusa.com website:
http://www.allianzusa.com/about/

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 Budgeting in Nonmanufacturing Organizations. (n.d.). Retrieved March 5, 2020, from
saylordotorg.github.io website: https://saylordotorg.github.io/text_managerial-accounting/s13-04-
budgeting-in-nonmanufacturing-.html

Prepare Operating Budgets - Principles of Accounting, Volume 2: Managerial Accounting - OpenStax.

(n.d.). Retrieved March 5, 2020, from openstax.org website: https://openstax.org/books/principles-
managerial-accounting/pages/7-2-prepare-operating-budgets

What is a Master Budget? - Definition | Meaning | Example. (2019). Retrieved March 5, 2020, from
My Accounting Course website: https://www.myaccountingcourse.com/accounting-dictionary/master-
budget

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