CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control
Which budget is normally prepared first when sales demand is the limiting (principal budget) factor of Gupta Traders Ltd.?
The sales budget is prepared first. When sales demand is the principal budget factor, it limits the organisation's activity, so every other budget such as production, purchases and cash is derived from the sales budget, with the master budget consolidated last.
- ACash budget
- BProduction budget
- CSales budgetCorrect
- DMaster budget
Explanation
The principal budget factor is the constraint limiting activity. When it is sales demand, the sales budget is prepared first and other budgets are built on it. The master budget is the final consolidation, so it comes last.
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