1. In regards to a companys production budget, which of the following is true?

a) The budget for direct labor begins with the required production (in units) from the production budget.

b) The production budget details the required raw materials purchases.

c) The production budget details the number of direct labor hours required.

d) If the number of units in finished goods inventory at the end of the period is less than the number of units at the beginning, then the expected number of units sold is less than the number of units to be produced during the period.

2. Which of the following statements about budgeting is correct?

a) The starting point to preparing a companys master budget is preparation of a cash budget.

b) A companys production budget is prepared typically prior to completion of the sales budget.

c) One of the drawbacks of budgets is that they are of little value in uncovering potential bottlenecks.

d) A continuous budget is a 12-month budget that rolls forward one month as the current month is completed.