COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Prepare an estimate of the period’s cash outflow.
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Secure an approximation of the total revenues for the budget period.
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Set goals for the organization.
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Define mission for the organization.
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Review last period’s budget goals.
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Detailed explanation-1: -All budgets begin with the sales budget. This budget estimates the number of units that need to be manufactured and precedes the production budget. The production budget (refer to Figure 10.5) provides the necessary information for the budgets needed to plan how many units will be produced.
Detailed explanation-2: -The starting point when budgeting for a not-for-profit organization is generally to budget expenditures first. A merchandiser has a merchandise purchases budget rather than a production budget. A critical factor in budgeting for a service firm is to determine the amount of products to purchase.
Detailed explanation-3: -Answer and Explanation: The sales budget should always be prepared first. The sales budget is an important component of the budgeting process and it indicates the forecast of units that will be sold in the period as well as the revenue to be earned from these sales.
Detailed explanation-4: -A budget is a guide that can help a nonprofit plan for the future as well as assess its current financial health. It is good practice to periodically review the budget as well as compare it to the actual cash flow and expenses, to determine whether they are playing out as expected during the course of the year.