Question

Which of the following represents the normal sequence in the preparation of master budgets? Multiple Choice...

Which of the following represents the normal sequence in the preparation of master budgets?

Multiple Choice

  • Sales, Production, Direct Material, Direct Labor, Manufacturing Overhead.

  • Direct Materials, Cash, Sales, Production, Direct Labor, Manufacturing Overhead.

  • Sales, Production, Balance Sheet, Cash, Manufacturing Overhead.

  • Production, Sales, Income Statement, Cash, Direct Labor, Manufacturing Overhead.

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Answer #1

Ans. Option 1st  Sales, Production, Direct Material, Direct Labor, Manufacturing Overhead.

Explanation:

In the preparation of master budget, first of all sales budget is prepared to calculate the amount of total sales.

The second step is to prepare production budget by the help of unit sales.

The third step is related to direct materials budget and the fourth is direct labor budget. These two budgets are based on units produced.

The next step is to prepare manufacturing overhead budget which is prepared on the basis of direct labor hours.

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