In what order are the following budgets prepared? IS. budgeted income statement
P.production budget
SA.selling and administrative budge
MP.materials purchases budget
A)SA, P, MP, IS
B)P, MP, IS, SA
C)P, MP, SA, IS
D)MP, P, SA, IS

Question

In what order are the following budgets prepared? IS. budgeted income statement 
P.production budget 
SA.selling and administrative budge 
MP.materials purchases budget
A)SA, P, MP, IS
B)P, MP, IS, SA
C)P, MP, SA, IS
D)MP, P, SA, IS

Quizplus · Accepted Answer

Typically, the order of budget preparation is as follows: 
1) Sales Budget (SA) - predicts the expected sales revenue for the period 
2) Production Budget (P) - determines the number of units that need to be produced to meet the sales demand and maintain inventory levels 
3) Materials Purchase Budget (MP) - estimates the quantity and cost of raw materials needed for production 
4) Income Statement Budget (IS) - summarizes the expected revenues and expenses for the period.

Therefore, the correct order is P, MP, SA, IS. Choice C follows the correct order, while the other options do not.

In What Order Are the Following Budgets Prepared? IS