Question

When a company is preparing a budgeted statement of cash flows, the payments to suppliers for purchases of direct materials can be obtained from the ________.

A) cash budget
B) sales budget
C) production budget
D) budgeted balance sheet

Answer 1

When preparing a budgeted statement of cash flows, payments to suppliers for purchases of direct materials are found in the cash budget, which details all cash transactions including materials needed based on the production budget.

Step-by-step explanation:

When a company is preparing a budgeted statement of cash flows, the payments to suppliers for purchases of direct materials can be obtained from the cash budget. The cash budget takes into account all the cash inflows and outflows, including those from operations, financing, and investing activities. It specifically outlines the expected payments for direct materials, which are derived from the production budget that dictates how much inventory will be produced and thus the materials needed. Furthermore, the cash budget considers payment terms and timing, ensuring that the timing of cash outflows for material purchases is accurately reflected.