For a manufacturing entity, if:
1 is the budgeted balance sheet
2 is the budgeted income statement
3 is the production budget
4 is the sales budget
5 is the cash budget
6 is the cost of sales budget;
Then the normal sequence of budget preparation is:
A) 4, 5, 6, 2, 3, 1.
B) 4, 3, 6, 2, 5, 1.
C) 4, 6, 2, 3, 5, 1.
D) 5, 2, 4, 6, 3, 1.

Question

Quizplus · Accepted Answer

The normal sequence starts with the sales budget (4), as sales forecasts are the basis for other budgets. Next is the production budget (3), which is based on sales plus inventory adjustments. The cost of sales budget (6) follows, as it depends on the production budget. The budgeted income statement (2) is prepared next, incorporating sales and cost of sales. The cash budget (5) is then prepared, influenced by income and other budgets. Finally, the budgeted balance sheet (1) is prepared, summarizing the financial position after considering all other budgets.

For a Manufacturing Entity, If