Question

A company that uses activity-based budgeting performs the following:

1—Plans activities for the budget period.

2—Forecasts the demand for products and services as well as the customers to be served.

3—Budgets the resources necessary to carry out activities.

Which of the following denotes the proper order of the preceding activities?

Multiple Choice

1-2-3.

2-1-3.

2-3-1.

3-1-2.

3-2-1.

Answer 1

The correct choice is 2-1-3

Reason:

in any organization, based on the past performance, will perform a budget analysis which gives a fair idea of the company's ability to meet the set standards and it helps in identifying the industry trends. This means it is primary reflects the forecast of demand for their products and service.

Following by company will plan their activities based on the results of the forecast of their products demand.

The plan specifies how much quantity to be produced, how to allocate overheads, how to allocate resources and method of supplying them to various clients and customers.