Consider the following budgets: (1)Direct materials
(2)Income statement
(3)Production
(4)Cost of goods sold
In what order should these budgets be prepared?

Question

Quizplus · Accepted Answer

The correct order starts with the Production budget (3), as it determines the number of units to be produced. Next, the Direct Materials budget (1) is prepared, which depends on the production plan. Following that, the Cost of Goods Sold budget (4) is calculated based on the direct materials and production. Finally, the Income Statement budget (2) is prepared, which incorporates the cost of goods sold along with other expenses and revenues to project net income.

Consider the Following Budgets: (1)Direct Materials