Question

Budgeted production depends on

A. the direct materials usage budget and direct material purchases budget.
B. the direct manufacturing labor budget.
C. budgeted sales and expected changes in inventory levels.
D. the manufacturing overhead costs budget.

Answer 1

Budgeted production is based on budgeted sales and the expected inventory changes. It is crucial to manage variable costs like labor and raw materials which change with the level of output.

Step-by-step explanation:

Budgeted production depends on budgeted sales and expected changes in inventory levels. This is because production must align with the demand forecasted through sales and adjust for any required change in inventory, either an increase to build stock or a decrease to reduce it. Additionally, understanding variable costs is crucial since they change with output; variable costs such as labor and raw materials are significant as producing more goods often requires more input in the form of labor hours and materials.