Multiple Select QuestionSelect all that applyWhich of the following are budgets used by a service company:Multiple select question.CashCapital expendituresDirect materialsDirect laborSalesProduction
Question
Multiple Select QuestionSelect all that applyWhich of the following are budgets used by a service company:Multiple select question.CashCapital expendituresDirect materialsDirect laborSalesProduction
Solution
A service company typically does not deal with direct materials or direct labor as these are more applicable to manufacturing companies. Production budget is also not applicable for a service company as they do not produce goods. Therefore, the budgets used by a service company from the given options would be:
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Cash Budget: This budget is used to estimate a company's future cash position to ensure that there is sufficient cash flow to meet its operational needs.
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Capital Expenditures Budget: This budget is used to plan for major purchases of assets that will be used over a long period, such as equipment or property.
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Sales Budget: This budget is used to plan for future sales revenue. It is typically the first budget to be prepared in a budgeting process as other budgets rely on the forecasted sales.
So, the correct answers are Cash, Capital expenditures, and Sales.
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