Final answer:
The statement is FALSE; the revenues budget is not based on the cost of goods sold budget but rather the other way around. Revenue budgets are prepared first, based on market demand and pricing, after which the cost of goods sold budget is determined.
Step-by-step explanation:
The statement that 'The revenues budget should be based on the cost of goods sold budget' is FALSE. The revenues budget is typically developed first because it estimates the potential sales of the firm. It is a projection of how much money the company expects to generate from the sale of its products and is determined largely by the market demand and the price at which the goods or services will be offered. The cost of goods sold budget, on the other hand, is determined based on the projected revenues and involves estimating the costs associated with producing the goods or services the firm plans to sell.
It's important to understand that while the cost of goods sold is influenced by the revenues budget through the production volume, it does not serve as the foundation for the revenues budget. Instead, it's the other way around; the cost of goods sold budget is developed after the revenues budget to ensure that the cost of production is aligned with revenue expectations.