CMA Exam: Budgeting Methodologies Question 2

 “Those who mind don’t matter, and those who matter don’t mind.” – Bernard M. Baruch

The Question

When budgeting, the items to be considered by a manufacturing firm in going from a sales quantity budget to a production budget would be the:

A) Expected change in the quantity of finished goods and raw material inventories
B) Expected change in the availability of raw material without regard to inventory levels
C) Expected change in the quantity of finished goods and work-in-process inventories
D) Expected change in the quantity of work-in-process inventories

The Analysis

The first step in the budgeting process is developing the sales budget. The sales budget will be the driver of all the other budgets. Why? Because all the budgets of an organization that support sales will be developed based on the sales projections for the coming year.

In a manufacturing company, units must be produced prior to the time when they will be sold. To ensure that the correct volume of units are produced at the right time, a manufacturing company will develop a production budget based on the level of sales in the sales budget.

To determine the quantity that should be produced during a period given the level of sales for the period, the levels of finished goods and work-in-process inventories should be considered.

The Answer

A) Expected change in the quantity of finished goods and raw material inventories
B) Expected change in the availability of raw material without regard to inventory levels
C) Expected change in the quantity of finished goods and work-in-process inventories
D) Expected change in the quantity of work-in-process inventories

Final Thoughts

Thanks again for visiting and going through this post. I hope that you found it helpful. Feel free to post below any questions that you may have. I’m here to help.

Thank you,
Nathan

Get Your FREE Copy of the
CMA Exam Part-One Textbook

HURRY! Only 1,000 FREE Copies Available

Save over $300 today by claiming your FREE copy of my CMA Part-One test prep textbook in paperback.

Written by CPAs and CMAs in an easy-to-understand format. It covers every single section and topic you'll be tested on your CMA exam.

Just help with shipping and handling charges and the textbook is yours for FREE.

Claim yours while supplies last. Click on “I Want My Free Textbook“ now.

I Want My Free Textbook

Leave a Reply

Your email address will not be published. Required fields are marked *