During a global semiconductor shortage, a consumer electronics company finds that it can sell as many smart home hubs as it can produce, but it cannot source enough microchips to meet production targets.

Which of the following statements regarding the 'Principal Budget Factor' (Limiting Factor) are correct in this scenario? (Select all that apply)

The Principal Budget Factor (or limiting factor) is the factor that limits the activities of an organization. Usually, this is sales demand. However, in this scenario, it is the shortage of microchips (materials). The golden rule of budgeting is that the budget for the principal budget factor must be prepared first. Therefore, the materials budget dictates the production budget, which dictates the sales budget.