Which item is not typically included in a functional budget?

Which item is not typically included in a functional budget?

• A. Sales budget
• B. Production budget
• C. Material purchases
• D. Cash flow forecast

Answer: (D)

Functional budgets are the operating plans for specific areas, outlining what the business intends to do in terms of sales, production, and material purchases. The sales budget forecasts demand, the production budget translates that demand into units to manufacture, and the materials purchases budget estimates the raw materials needed to support production. A cash flow forecast, however, focuses on the timing of cash receipts and payments to keep the business solvent and is typically part of the cash budget or master budget rather than a functional budget. So, the item not typically included in a functional budget is the cash flow forecast.

Functional budgets are the operating plans for specific areas, outlining what the business intends to do in terms of sales, production, and material purchases. The sales budget forecasts demand, the production budget translates that demand into units to manufacture, and the materials purchases budget estimates the raw materials needed to support production. A cash flow forecast, however, focuses on the timing of cash receipts and payments to keep the business solvent and is typically part of the cash budget or master budget rather than a functional budget. So, the item not typically included in a functional budget is the cash flow forecast.