Multiple Choice
A common use of business plans is to:
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1. Introduction to Accounting
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A budget which estimates the types of selling expenses expected during the budget period is called a:
A
Direct materials budget
B
Production budget
C
Selling expense budget
D
Cash budget
Verified step by step guidance1
Understand the concept of a budget: A budget is a financial plan that estimates income and expenses over a specific period. Different types of budgets focus on various aspects of a business's operations.
Identify the purpose of a selling expense budget: This type of budget specifically estimates the costs associated with selling activities, such as advertising, sales commissions, and delivery expenses, during the budget period.
Compare the selling expense budget to other types of budgets mentioned: For example, a direct materials budget focuses on estimating the cost of raw materials needed for production, while a production budget estimates the number of units to be produced. A cash budget forecasts cash inflows and outflows.
Recognize that the selling expense budget is distinct because it focuses solely on selling-related costs, which are crucial for planning and controlling expenses tied to sales activities.
Conclude that the correct answer is 'Selling expense budget,' as it aligns with the definition provided and the context of the problem.
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