Final answer:
The correct sequence of budgets for a manufacturing firm is: Sales budget, Production budget, Direct materials budget, Direct labor budget, Manufacturing overhead budget, Selling and administrative expenses budget, and Budgeted income statement.
Step-by-step explanation:
In a manufacturing firm, budget dependencies determine the sequence of creating budgets. It all starts with the Sales budget, projecting expected sales. The Production budget relies on the Sales budget, estimating units to be produced based on expected sales. Then comes the Direct materials budget, forecasting materials needed for production, followed by the Direct labor budget, estimating labor required for production based on the production units. The Manufacturing overhead budget covers other production costs, while the Selling and administrative expenses budget accounts for non-production expenses. These budgets culminate in the Budgeted income statement, summarizing the financial outlook.
Correct answer: Sales budget, Production budget, Direct materials budget, Direct labor budget, Manufacturing overhead budget, Selling and administrative expenses budget, and Budgeted income statement.