Question

Which of the following statements is(are) true? (A) A favorable variance is not necessarily good, and an unfavorable variance is not necessarily bad. (B) The master budget includes operating budgets (e.g., production budget) and financial budgets (e.g., cash budget).

Answer 1

Answer:

(B) The master budget includes operating budgets (e.g., production budget) and financial budgets (e.g., cash budget).

Explanation:

The master budget is a business approach which includes all the financial budget as well as the expected incoem statement adn balance sheet.

To do so, it wll need to prepare:

• the sales budget

• the production budget (using sales budget)

• the purchase budget (using production)

• collection budget (using sales)

• cash budget (using all of the previous budget)

• And then combine all this data to create an income statement and balance sheet for the period.