Sarah is trying to prepare the manufacturing budgets. She believes that the manufacturing overhead budget will be the most complicated, so she decides to tackle it first before the direct materials and direct labor budgets. Do you think this is the best way to prepare the budgets? Why or why not? A : No, because the manufacturing overhead budget depends on the direct labor budget, so the direct labor budget needs to be prepared first. B : Yes, because the manufacturing overhead budget only depends on the sales budget, which should already be complete. C : Yes, because the manufacturing overhead budget does not depend on any other budget, so it can be prepared at any time. D : No, because the manufacturing overhead budget depends on the direct materials budget, so the direct materials budget needs to be prepared first.

A manufacturing overhead budget is a budget that includes all the manufacturing costs in an organization other than the costs of direct labor and direct materials. The labor cost or the material cost are prepared separately in the direct labor budget or the direct materials budget. The manufacturing overhead budget is determined by the direct labor budget.

In the context, Sarah who is preparing a manufacturing budgets can has to prepare the direct labor budget before preparing the manufacturing overhead budget.

Hence the answer is --

A : No, because the manufacturing overhead budget depends on the direct labor budget, so the direct labor budget needs to be prepared first.