Final answer:
It is false to say that a cash budget is unnecessary under level production. Cash budgets consider more than just fixed production costs, including variable expenses and unexpected changes in input costs. Thus, they are crucial for managing cash flow and ensuring financial stability.
Step-by-step explanation:
The statement "A cash budget is unnecessary under level production since we know how much will be produced every month" is false. A cash budget remains a critical element of financial planning; it doesn't only account for production costs but also for other variable expenses and revenues. Even with level production, the costs of inputs like labor and machinery might fluctuate. For instance, if wages increase, as shown in the provided examples, the cost of production could rise, affecting the cash budget.
Moreover, a cash budget helps in managing cash flow to ensure that there is sufficient liquidity to cover variable expenses, which, as highlighted, can differ each month. It is a tool that supports productive efficiency by preventing situations where a company might have to decrease output of one good due to cash shortages. Finally, it helps individuals make choices based on their budget constraint, maximizing their utility or satisfaction from the use of available financial resources.