Question

LO 7.2Which of the following statements is not correct?

The sales budget is computed by multiplying estimated sales by the sales price.
The production budget begins with the sales estimated for each period.
The direct materials budget begins with the sales estimated for each period.
The sales budget is typically the first budget prepared.

Answer 1

The incorrect statement is letter "C": The direct materials budget begins with the sales estimated for each period.

Step-by-step explanation:

The direct materials budget is calculated after the production budget has been planned. In it, all the raw materials needed for the manufacturing of the product will be included. Direct materials are considered to have variable costs since their pricing relies on internal and external economic factors. The direct materials budget does not start with the sales budget but with the production planning.