Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare?
A) Orange Co. will prepare a production budget and Pineapple Company will prepare a merchandise purchases budget.
B) Orange Co. will prepare a sales forecast and Pineapple Company will prepare a sales budget.
C) Pineapple Company will prepare a production budget and Orange Co. will prepare a merchandise purchases budget.
D) Both companies will prepare the same types of budgets.

Question

Quizplus · Accepted Answer

The main difference between a manufacturer and a merchandiser is that a manufacturer produces goods while a merchandiser buys and sells goods. Therefore, the type of budgets they prepare will differ. Orange Co. as a manufacturer will prepare a production budget that focuses on the estimated units of products that will be produced during the budget period. On the other hand, Pineapple Company as a merchandiser will prepare a merchandise purchases budget that is focused on the estimated units of inventory that need to be bought during the budget period. Therefore, the best choice is A.

Orange Co Is a Manufacturer and Pineapple Company Is a Merchandiser