Question

Which of the following is the correct order for the preparation of the listed budgets? A) Budgeted income statement, sales budget, cash budget B) Cash budget, capital acquisitions budget, direct labor budget C) Sales budget, direct material purchases budget, budgeted income statement D) Direct labor budget, sales budget, budgeted income statement

Answer 1

Answer:

The correct option is C,sales budget, direct material purchases budget, budgeted income statement

Explanation:

Te correct order in preparing budgets is to first of all have a sales forecast based on information on previous years' sales figures as well as looking at the future economic outlook.

When sales forecasts are made based on educated guess,the sales budget is prepared using the most appropriate selling price  per unit.

Thereafter,based on the number of units planned for sales,the required materials needed to accomplish the sales level is forecast,hence direct material purchases budget is prepared with informed unit cost of material.

Lastly,the income statement which encompasses both revenue from sales budget in addition to costs from direct materials purchase budget is finalized.