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

Question

Quizplus · Accepted Answer

Company A, as a manufacturer, will need to prepare a production budget that outlines the cost and quantity of raw materials needed for production, as well as the labor and overhead costs involved in creating finished goods. On the other hand, Company B, as a merchandiser, will prepare a merchandise purchases budget that outlines the estimated cost and quantity of goods they will need to purchase from manufacturers like Company A to ensure they have enough inventory to fulfill their sales goals. Therefore, the difference in the nature of their business will lead to a difference in the type of budgets they prepare.

Company a Is a Manufacturer and Company B Is a Merchandiser