Mastering the Budgeting Sequence: Sales, Production, and Income for Optimal Firm Performance

Which of the following is the sequence in which the budgets of a firm are prepared?a. Budgeted income statement, overhead budget, and sales budgetb. Marketing expense budget, research and development expense budget, and sales budgetc. Sales budget, production budget, and budgeted income statementd. Ending finished goods inventory budget, direct labor budget, and production budget

C

The correct sequence in which the budgets of a firm are prepared is:

c. Sales budget, production budget, and budgeted income statement.

The sales budget sets the projected sales for the upcoming period. Based on the sales budget, the production budget is prepared, which outlines the number of units that need to be produced to meet the sales forecast. Finally, the budgeted income statement is prepared, which takes into account all the projected revenues and expenses to estimate the net income for the period.

Therefore, the correct sequence is to first prepare the sales budget, then the production budget and lastly the budgeted income statement. Options (a), (b), and (d) do not reflect the correct sequence of budgets in a firm.

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