A Budgeting Method That Assigns Costs First to Activities and Then

question 40

Multiple Choice

A budgeting method that assigns costs first to activities and then to projects based on each project's use of resources is:

• A)activity-based budgeting.
• B)zero-based budgeting.
• C)top-down budgeting.
• D)bottom-up budgeting.

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its revenues, highlighting the impact of fixed costs on profitability.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, indicating how much each unit sold contributes to fixed costs and profit.