Question

In preparing an operating budget, the sales budget is prepared first. Which of the following is prepared next?

Answer 1

Operating budget is prepared to calculate the estimates of total value of the resources required in order to perform the operation.

First of all while preparing operating budget the first budget which is prepared is sales budget.

After the sales budget is prepared production budget is prepared in order to calculate the the total number of units to be produced.

Similarly direct material budget is prepared in order to calculate the direct material required in producing the finished goods.

After this direct labour budget is prepared which describes the total direct labour hours required in order to produce the finished goods.

Factory overhead budget is prepared to calculate the estimated overheads which will be incurred in the production.

Cost of goods sold budget is prepared in order to calculate the total cost of the product which is produced.

Similarly selling and administrative budget is prepared to find out the total selling and administrative cost incurred while producing the finished goods.

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