The master budgeting process begins with the:

• A. production budget
• B. sales budget
• C. direct materials budget
• D. cash budget

Answer: (B)

Verified step by step guidance

1. Understand the concept of a master budget: A master budget is a comprehensive financial planning document that includes all individual budgets within an organization, such as sales, production, direct materials, and cash budgets.
2. Recognize the sequence of the budgeting process: The master budget begins with the sales budget because it forecasts the expected sales revenue, which drives other budgets like production and materials.
3. Learn the purpose of the sales budget: The sales budget estimates the quantity of goods or services the company expects to sell and the revenue generated. This information is crucial for planning production and resource allocation.
4. Connect the sales budget to the production budget: Once the sales budget is prepared, the production budget is created to determine the number of units that need to be produced to meet sales demand and maintain inventory levels.
5. Understand how subsequent budgets depend on the sales budget: After the production budget, other budgets like the direct materials budget, labor budget, and cash budget are developed based on the production requirements and financial needs.