Choice "C" is correct. The production budget is based on the sales budget (or forecast), with modification for increases or decreases in inventory levels.Choice "a" is incorrect. The production budget does include direct labor hours, but it also includes much more.Choice "d" is incorrect. The production budget does include the cost of materials used in production, but it also includes much more.Choice "b" is incorrect. The operating budget includes all budgets (except capital purchases and cash) and includes the pro forma income statement; it goes beyond the production budget.
