Prepare a sales budget, including schedule of expected cash receipts. The sales budget forms the foundation for the master budget. It provides details concerning the anticipated units and dollar sales for each budget period. The schedule of excepted cash receipts is based on the sales budget, the expected breakdown between cash and credits sales, and the expected pattern of collections on credit sales.
Prepare a production budget. The production budget details how many units must be produced each budget period to satisfy expected sales and to provide for adequate levels of finished goods inventories.
Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. The direct materials budget shows the materials that must be purchased each budget period to meet anticipated production requirements and to provide for adequate levels of materials inventories.
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