The direct materials budget is prepared using information from which of the following budgets?

• A. Production budget
• B. Direct labor budget
• C. Cash budget
• D. Sales budget

Answer: (A)

Verified step by step guidance

1. Understand the purpose of the direct materials budget: It estimates the quantity and cost of materials required for production during a specific period.
2. Recognize the relationship between the direct materials budget and the production budget: The production budget provides the number of units to be produced, which directly impacts the quantity of materials needed.
3. Note that the direct materials budget does not rely on the direct labor budget, cash budget, or sales budget directly. These budgets serve other purposes, such as estimating labor costs, cash flows, and sales revenue.
4. Identify the key input from the production budget: The production budget specifies the number of units to be produced, which is essential for calculating the materials required.
5. Conclude that the direct materials budget is prepared using information from the production budget, as it provides the foundational data for estimating material needs.