Question

Which of the following would depict the logical order for preparing (1) a production budget, (2) a cash budget, (3) a sales budget, and (4) a direct-labor budget?

A. 1-3-4-2.
B. 2-3-1-4.
C. 2-1-3-4.
D. 3-1-4-2.
E. 3-1-2-4.

Answer 1

The logical order for preparing the budgets is sales budget, direct-labor budget, production budget, and cash budget.

Step-by-step explanation:

The logical order for preparing the budgets would be:

1. Sales Budget: The sales budget is prepared first because it provides the basis for the other budgets. It estimates the expected sales revenue for a specific period.

2. Direct-Labor Budget: The direct-labor budget is prepared next. It estimates the labor costs associated with the production of goods, based on the projected sales volume.

3. Production Budget: The production budget is prepared after the sales budget and direct-labor budget. It determines the quantity of goods that need to be produced to meet the sales demand.

4. Cash Budget: The cash budget is prepared last. It takes into account the projected inflows and outflows of cash, considering the production and sales activities.