Which budget is the first one that must be done in the master budgeting process and why?

The sales budget is the first budget to be developed in the master budgeting process. The sales budget forms the basis for the rest of the budgets. A company must know estimated sales of each product in order to determine how much must be produced. The production budget, in turn, is used to develop the direct materials purchases, direct labor, and overhead budgets. These three budgets provide useful information in determining cost of goods sold. Clearly, the budgeted income statement requires the budgeted revenue from the sales budget. Without this budget, the others cannot be developed.