In the budgeting process for a startup, which step normally follows forecasting revenues?

In the budgeting process for a startup, which step normally follows forecasting revenues?

• A. Prepare budget
• B. Monitor variances
• C. Estimate costs
• D. Revise as needed

Answer: (C)

The step that normally follows forecasting revenues is estimating costs because you need to translate the expected level of activity into the resources and expenses required to support it. By projecting both fixed and variable costs—such as salaries, rent, materials, and marketing—the startup can see how much will be spent to achieve the forecasted revenue. This cost information is essential to build a realistic budget and determine profitability, cash needs, and resource allocation. After costs are estimated, the next move is to prepare the budget, then monitor variances and revise as needed.

The step that normally follows forecasting revenues is estimating costs because you need to translate the expected level of activity into the resources and expenses required to support it. By projecting both fixed and variable costs—such as salaries, rent, materials, and marketing—the startup can see how much will be spent to achieve the forecasted revenue. This cost information is essential to build a realistic budget and determine profitability, cash needs, and resource allocation. After costs are estimated, the next move is to prepare the budget, then monitor variances and revise as needed.