Question

In which order should you prepare these budgets?

1. sales budget
2. direct material budget
3. cash receipts budget
4. production budget
5. overhead budget
6. budgeted balance sheet
a)1,2,3,4,5,6
b)1,4,2,5,3,6
c)1,3,6,2,4,5
d)3,1,2,5,4,6

Answer 1

The correct order to prepare the budgets is 1,4,2,5,3,6.

Step-by-step explanation:

The correct order to prepare these budgets is option b)1,4,2,5,3,6.

1. The sales budget should be prepared first because it provides an estimate of the expected sales revenue for the budgeting period.

2. The production budget should be prepared next because it determines the quantity of products to be produced based on the sales forecast and desired inventory levels.

3. The direct material budget should be prepared after the production budget because it calculates the quantity and cost of materials needed for production.

4. The overhead budget should be prepared next as it outlines the estimated costs of overhead expenses such as rent and utilities.

5. The cash receipts budget should be prepared after the overhead budget to estimate the cash inflows from sales and other sources.

6. Finally, the budgeted balance sheet should be prepared last as it summarizes the company's financial position for the budgeting period.