In a manufacturing company, which budget is typically prepared immediately after the sales budget?

• A. Direct materials budget
• B. Cash budget
• C. Selling and administrative expenses budget
• D. Production budget

Answer: (D)

Verified step by step guidance

1. Understand the sequence of budgets in a manufacturing company: The sales budget is typically the starting point, as it forecasts the expected sales volume and revenue.
2. Recognize that the production budget is prepared immediately after the sales budget. This is because the production budget determines the number of units that need to be produced to meet sales demand and maintain inventory levels.
3. Learn the components of the production budget: It includes calculations for required production units based on expected sales, beginning inventory, and desired ending inventory.
4. Understand why other budgets, such as the direct materials budget, cash budget, and selling and administrative expenses budget, are prepared later. These budgets depend on the production budget to estimate material needs, cash flows, and operational expenses.
5. Review the logical flow: Sales budget → Production budget → Direct materials budget → Cash budget → Selling and administrative expenses budget. This sequence ensures that all operational and financial planning aligns with the sales forecast.