Question

The direct materials and direct labor budgets provide information for preparing the

Answer 1

D) cash budget.

Step-by-step explanation:

Any budget is only a management tool, since it is really not an official accounting statement, nor it actually reports anything. They are extremely useful to measure a company's productivity and efficiency compared to previous standards. A budget generally works by taking previous expenses, consumptions and outputs, and then estimates the future costs, but they are only estimates that usually need to be adjusted. Budgets are adjusted for both positive reasons (increase in efficiency and productivity) or negative reasons (wasted materials, time, etc.).

In this case, direct materials and direct labor are usually referred to as prime costs since they are directly related to the production process. When you are estimating or budgeting prime costs, you are estimating your cash budget, because prime costs result in cash outflows. You need cash to purchase materials and you need cash to pay for workers. On the other hand, overhead costs are usually associated with indirect costs like depreciation, and other expenses that also require cash outflows like supervisors' salaries, utilities, etc. But the bulk of cash outflows is determined by the prime costs.

Answer 2

The cash budget is the appropriate answer

Step-by-step explanation:

When the budgeted direct materials as well as the required budgeted labor hours are ascertained, the step needs to be taken further in order to know how the costs budgeted fit into overall cash situation of the business.

The suppliers of direct materials would have given the company the maximum number of days that expect cash , in order to meet up with such deadline the company must plan ahead by incorporating the values of such purchases into cash flow projections, the same also applies to cost of direct labor.