ECONOMICS
BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the direct materials purchase budget.
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the budgeted income statement.
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the sales forecast or sales budget
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the production budget.
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Detailed explanation-1: -The starting point of the master budget is the sales budget. The ending point of the master budget is the budgeted financial statements. Since the budgeted financial statements include both an income statement and balance sheet, each step in the master budget has both an income statement and balance sheet component.
Detailed explanation-2: -The sales budget is a starting point for budgeting for any organization because inventory levels, purchases, and operating expenses are geared to the expected level of sales. Accurate sales forecasting is essential to effective budgeting.
Detailed explanation-3: -The projected balance sheet, or financial budget, depends on many items in the projected income statement. Thus, the logical starting point in preparing a master budget is the projected income statement, or planned operating budget.
Detailed explanation-4: -Answer and Explanation: The first step in preparing the master budget is the D) sales budget. Establishing the value of sales is the starting point of the budget. This is because all the firm’s operations will be based on the volume of the sales that needs to be achieved.