EFG is preparing a budget for the first quarter of 20X3. The next step in the budget process is to

prepare a cash collection plan and a cash payment plan. For this purpose, the following

information is collected.

Customers typically pay 60% the month the service is provided, 30% the following month, and

10% the following month after receiving the service.

Actual service revenue for 20X2 and expected service revenue for 20X3 are: Nov 20X2,

$120,000; Dec 20X2, $110,000; Jan 20X3, $140,000; Feb 20X3, $160,000; Mar 20X3,

$190,000.

Purchases of landscape supplies (direct materials) pay 40% one month of purchase and 60% the

following month. Actual purchases in 20X2 and expected purchases in 20X3 are: December

20X2, $21,000; January 20X3, $20,000; February 20X3, $22,000; March 20X3, $25,000.

c) Which budget is the first one that must be completed in the master budgeting process and

why?