Answer (D) is correct . Neither a master budget nor a production budget can be prepared until after the sales budget has been completed. Once a firm knows its expected sales, production can be estimated. The production budget is based on assumptions appearing in the sales budget; thus, the sales budget is the first step in the preparation of a production budget.
Answer (A) is incorrect because The direct labor budget cannot be prepared until after unit production figures have been compiled.
Answer (B) is incorrect because The direct materials budget cannot be prepared until after the unit production figures have been compiled.
Answer (C) is incorrect because The manufacturing overhead budget cannot be prepared until after the unit production figures have been compiled.
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