A common starting point in the budgeting process is:

• A. Estimating cash disbursements
• B. Setting production quotas
• C. Preparing the sales budget
• D. Calculating depreciation expense

Answer: (C)

Verified step by step guidance

1. Understand the budgeting process: Budgeting is a financial planning tool that helps organizations allocate resources effectively. The sales budget is typically the starting point because it drives other budgets, such as production, cash disbursements, and expense budgets.
2. Define the sales budget: The sales budget estimates the expected revenue from sales during a specific period. It is based on projected sales volume and selling prices.
3. Recognize the importance of the sales budget: The sales budget serves as the foundation for other budgets. For example, production quotas are determined based on sales forecasts, and cash disbursements are planned based on expected sales collections and payments.
4. Understand the relationship between budgets: Once the sales budget is prepared, it informs other budgets, such as the production budget (to meet sales demand), cash budget (to manage inflows and outflows), and expense budgets (to allocate costs).
5. Learn the sequence: The budgeting process typically starts with preparing the sales budget, followed by production, cash disbursements, and other related budgets. Depreciation expense is calculated later as part of the expense budget.