 Hello in this lecture, we're going to talk about the master budget. We're going to go through the sales budget, the production budget, and the materials budget. At the end of this, we will be able to list the components of the master budget to create the sales budget to create the production budget and create the materials budget. So we're going to start off, we just want to look at the list and the activities that go through the master budget for a production company, something that a company that produces things. And this is similar to many types of budgets when we think about the most basic type of budget many people think of, well, let's take a look at the income statement, how we did last year, you know, basically divided by 12, make some adjustments, and that will be our budget for the months going forward to the next year. That's the most basic kind of components of the budget. And that's how any budget kind of starts off, we're going to look at last time's material, what happened, how did we perform, and then make some adjustments into the future. As we get more sophisticated, of course, we want to think about other things into the future, other than just past performance, like what's the economy going to be like, what are some changes, what's going to be the effect on the on the sales and our expenses and whatnot going forward. We're going to look at a production budget, a production budget for a company that produces things being more complex in many ways and being more linear in the way we have to build it, because of the fact that we're producing things. And the same principles will apply to many different types of budgets. So we're going to have to start off with the sales budget. That's the first place we need to start off no matter what type of budget we have, how much are we going to sell in terms of units of sales, we produce inventory and sell inventory, we need to think about how many units we're going to sell, and then how much revenue we're going to get on that. Even if we take it down to our personal budget, we want to think about well how much are we going to earn in the future time period. For many individuals and many business businesses, the amount we may earn may be fairly constant. That's why we can take last year's performance and basically budget it forwards. But it may change as well for many people, it may change our salary may vary. And that's the first thing we want to take a look at because we're going to base the rest of the budget on that. Then once we know how many units we're going to sell, we want to come up with the production budget, how much stuff are we going to produce in terms of like inventory, how many things do we need to produce. And you might be saying well that's easy, we know how many things we're going to sell, therefore we're just going to take how many things we're going to sell. That's how many we need to produce. And that would be the case if it was like our first year of production and we didn't want and we thought we were going to be very exact on our numbers. But we probably want to have a cushion to stuff we want to produce more than we're going to sell in case that we sell more than we thought we were going to sell. And we also probably had stuff that we didn't sell last time we had a cushion from last time. So we need to take those two things into consideration in terms of figuring out how many things we need to produce in order to meet the sales and these other kind of requirements that we want to have in terms of having a cushion in the inventory. Once we know how many things we're going to produce, then we can think about how much material we need to produce them. So let's say we're like making guitars or something, we know how many guitars we want to make. Now we need to figure out how much basically wood we want to put in. How much wood do we need to buy in terms of the production of the guitar, same kind of inventory type of questions. And we have the same kind of problems. It's not just that we need to buy the amount of wood in order to produce that many guitars. We need to figure out do we want to have an ending inventory of wood left over? Do we have any wood that's still in the inventory here? Same thing in terms of direct labor, which is a bit more straightforward. We're going to say how much direct labor will it take then to make these many units of production that we need to produce and the overhead, all the other stuff that's going to be involved, what's going to be the budget for the overhead to produce this many units. This isn't directly tied out. It doesn't have to be happening next, but the capital expenditures, do we want to buy new larger pieces of equipment and things like this? We need to plan out whether we have the cash flow and whether we can finance any more large expenditures. And then the selling and administrative budget, these are going to be more of the period costs. These are usually more costs that we can do kind of what we think about in our traditional budget. Look at what happened last time and project it forward because they're usually more fixed in nature rather than variable in nature along with the production. Then we can do the cash budget, the cash flow that will happen. And then we can kind of finally think about our budgeted balance sheet that we always think about our budgeted income statements and our budget statement of cash flow. So here's the statements that we're going to create. And again, most of us think about the budget oftentimes in terms of the income statement. Here's how we're going to perform in the future in terms of the income statement. But if we break this out into this process, we can do this first and then, you know, create our standard balance sheets from this projections. Alright, so we're going to start off with the sales budget. So sales budget here and we'll just break through these first three and then we'll talk about the rest of the budgets at a later time. So sales budget, we're going to say that we're going to do this for the quarter of July, August and September. In July, we're going to say in units, we're going to sell 20,600 units. Now, how do we come up with that number? If it's a...