What is the sequence of steps in preparing the master budget?
A) Output from the financial budget is used to prepare the operating budget.
B) Output from the operating budget is used to prepare the financial budget.
C) Output from the financial budget is used to prepare the budgeted income statement.
D) Output from the financial budget is used to prepare the operating expense budget.

Question

Quizplus · Accepted Answer

The sequence of steps in preparing the master budget is to first prepare the operating budget, which includes budgets for sales, production, direct materials, direct labor, and overhead expenses. Then, using the output from the operating budget, the financial budget is prepared, which includes the cash budget, capital expenditures budget, and budgeted balance sheet. Therefore, B is the correct choice as it shows that the output from the operating budget is used to prepare the financial budget.

What Is the Sequence of Steps in Preparing the Master