Claudia is getting mad! She has been given an assignment to complete a purchases budget, a sales budget, and a production budget and she is hopelessly stuck. Five minutes ago, she began the assignment. She realized that for the Operating Budgets, the textbook presents the sales budget first. “Well that doesn’t make any sense,” she tells herself “those stupid accountants don’t know what they’re doing! How can we make a sales budget if we don’t know how many goods will be available for sale in the first place? I think I should do a purchases budget first. Then I’ll know how many units I can produce, and then I’ll know how many I can sell!” Claudia has been staring at the assignment for the last five minutes and she keeps going in circles as to where to start. There doesn’t seem to be any good starting point and her anger is boiling under her skin. Her poor duct tape-covered book is about to go flying across the room once again or maybe out the window! (1) Is there a proper order for preparing Operating Budgets? If so, please explain to Claudia what that order should be and why the proper order matters. What are the flaws, if any, in her reasoning?
Claudia is getting mad! She has been given an assignment to complete a purchases budget, a sales budget, and a production budget and she is hopelessly stuck.
Five minutes ago, she began the assignment. She realized that for the Operating Budgets, the textbook presents the sales budget first. “Well that doesn’t make any sense,” she tells herself “those stupid accountants don’t know what they’re doing! How can we make a sales budget if we don’t know how many goods will be available for sale in the first place? I think I should do a purchases budget first. Then I’ll know how many units I can produce, and then I’ll know how many I can sell!”
Claudia has been staring at the assignment for the last five minutes and she keeps going in circles as to where to start. There doesn’t seem to be any good starting point and her anger is boiling under her skin. Her poor duct tape-covered book is about to go flying across the room once again or maybe out the window!
(1) Is there a proper order for preparing Operating Budgets? If so, please explain to Claudia what that order should be and why the proper order matters. What are the flaws, if any, in her reasoning?
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