ECONOMICS

Detailed explanation-1: -Before preparing the direct materials, direct labor, and manufacturing overhead budgets, the production budget must be completed. Production budget. The production budget shows the number of units that must be produced.

Detailed explanation-2: -The sales budget must be prepared before the production budget because a company bases its production on the sales units, and then adjust this for the desired inventory holding.

Detailed explanation-3: -G.A.Welshstates, “A budget is a written plan covering projected activities of a firm for a definite time period.” Budgetary Control: Budgetary Control is a method of managing costs through preparation of budgets. Budgeting is thus only a part of the budgetary control.

Detailed explanation-4: -The Use of the Master Budget The master budget summarizes projected activity by way of a cash budget, budgeted income statement and budgeted balance sheet. Most master budgets include interrelated budgets from the various departments. Managers typically use these subset budgets to plan and set performance objectives.