A master budget typically begins with the preparation of a sales budget. The next step is to prepare a production budget. Once the production budget has been completed, the next step is to prepare the direct labor, raw material, and overhead budgets. Thus, the production budget provides the input necessary for the completion of the direct labor budget.

The objective of ISO 9000 standards is to ensure consistent quality even if the quality is poor. The market determines the quality of the result.

One condition for condition of revenue from the sale of goods is the transfer of the significant risks and rewards of ownership. Retention of significant risk may occur when, for example, the buyer may rescind the purchase for a reason stipulated in the contract and the buy, is uncertain about the probability of return. However if the entity can reliably estimate future returns and recognize a liability for returns based on experience and other pertinent information, revenue may be recognized at the time of sale if the other conditions for revenue recognition are also met.

Given four production runs and an annual demand of 5.000 units, each production run must generate 1,250 units. Inventory will total 1.250 units at the completion of each run but will decline to zero just prior to the next run. Thus, the average inventory is 625 units (1.250 + 2), and the total carrying cost is US $6,250 (625 units x $10).

The coefficient of correlation r) measures the strength of the linear relationship between the dependent and independent variables. The magnitude of r is independent of the scales of measurement of x and y. The coefficient lies between -1.0 and +1.0. A value of zero indicates no linear relationship between the x and y variables. A value of +1.0 indicates a perfectly direct relationship, and a value of-1.0 indicates a perfectly inverse relationship.