Which one of the following represents the correct order in which the budget documents listed for a manufacturing company would be prepared?

Question

Quizplus · Accepted Answer

The correct order for a manufacturing company's budget documents is usually:

1. Sales budget 
2. Production budget (based on the sales budget) 
3. Direct materials budget (based on the production budget) 
4. Direct labour budget (based on the production budget) 
5. Manufacturing overhead budget/indirect costs budget 
6. Selling and administrative expense budget 
7. Budgeted income statement (based on the above budgets) 
8. Cash budget (based on the above budgets) 
9. Budgeted balance sheet (based on the above budgets)

Option B follows this order, since the sales budget is followed by the cash budget which is then followed by the direct materials budget and direct labour budget. Option A does not follow the correct order as it places the marketing budget before the direct materials budget and direct labour budget. Option C places the selling and administrative expense budget before the sales budget, which is not correct. Option D places the marketing budget before the direct materials budget which is also not correct.

Which One of the Following Represents the Correct Order in Which