Which of the following regarding Master Budgeting is true? a. The manufacturing overhead budget is typically prepared before the production budget.
b. The first budget a company prepares in a master budget is the production budget.
c. When preparing a direct materials budget, the units of raw material needed to meet production should be added to desired ending inventory and the beginning inventory for raw materials should be subtracted to determine the amount of raw materials to be purchased.
d. The cash budget is usually prepared after the budgeted income statement.

c. When preparing a direct materials budget, the units of raw material needed to meet production should be added to desired ending inventory and the beginning inventory for raw materials should be subtracted to determine the amount of raw materials to be purchased.

Explanation:

The master budget refers to the budget in which the expenses, sales, purchases, are recorded

It can be sales budgets, purchase budgets, etc that comes under the operating budget

While preparing the direct material budget, the raw material required to be purchased should be find out by using the following formula

= Ending inventory balance + cost of sales - beginning inventory balance

Or we can say

Cost of goods sold = beginning inventory + raw material purchase - ending inventory

hence, the correct option is c.

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