Which of the following listings correctly describes the order in which the four types of budgets must be prepared?
a. Sales, direct materials purchases, production, cash disbursements.
b. Sales, production, direct materials purchases, cash disbursements.
c. Cash disbursements, direct materials purchases, production, sales.
d. Production, direct materials purchases, sales, cash disbursements.

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TomShelby TomShelby · Answer 1 · 2019-09-06T03:48:38+02:00

Answer:

b. Sales, production, direct materials purchases, cash disbursements.

Explanation:

First, you calculate your sales.

Then, the amount produced to fulfill your sales and desired inventory stocks

Based on your production, you can calculate the direct materials purchases

Lastly, with the combination of raw materials purchases, along with other information, you generate the cash disbursements budget

a.- you need to know the production to know how much direct materials do you need. INCORRECT

c.- you can't calculate how much will you pay for the direct materials without knowing how many direct materials are needed. INCORRECT

d.- you need to know the number of sales, to know how much to produce. Else you will be producing without knowing how much do you need. INCORRECT