Final answer:
The correct option is D). The cash budget is the component of a master budget that depends on various other components, as it includes forecasting all cash inflows and outflows, including those from sales, direct materials, labor, overhead, and expenses.
Step-by-step explanation:
The question is asking which budget, within a company's master budget, is based on many other components of that master budget. The correct answer to this question is D. Cash budget. The cash budget integrates various elements of the master budget such as the sales budget, direct labor, overhead, selling, and administrative expenses to forecast the company's cash position. This is essential for effective cash management, ensuring that the company has enough cash to meet its obligations and avoid unnecessary borrowing.
The process of creating a cash budget includes reviewing other budgets to determine when revenues will be received and when expenses will be paid out. This budget takes into account all cash inflows from sales and other sources, as well as cash outflows for all expenditures, including payments for direct materials, direct labor, overhead, and selling and administrative expenses. It also considers the timing of these cash flows to protect the company's cash balance at the end of each period.