“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 as you learn everything you need to know about the CMA exam. Feel free to post below any questions that you may have. I’m here to help.
Thank you,
Nathan
Hi, I’m Nathan Liao (aka the CMA Coach)! For the last 10 years, over 82,000 accounting and finance pros came knocking at my door seeking guidance and help. If you’re also aiming to conquer the CMA exam on your very first try—without wasting away time or money—you’ve found your ultimate guide. Dive in deeper to discover more about me and the dedicated team that powers CMA Exam Academy. Click here and let’s embark on this journey together!
