The ________Method of Budgeting Is Being Employed When Expenditures Are

question 41

Multiple Choice

The ________method of budgeting is being employed when expenditures are allocated by looking at the revenue generated from sales of the product during one year. The
Information gathered from this examination is used to determine the next year's dollar amounts.

• A) arbitrary allocation
• B) return on investment
• C) payout planning
• D) percentage of sales

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Definitions:

Absorption Costing

A financial calculation approach that encompasses both direct and indirect expenses related to producing a product.

Variable Costing

An accounting method that only includes variable production costs (costs that change with the level of output) in the cost of goods sold and treats fixed costs as period costs.

Manufacturing Costs

The total costs incurred in the process of producing or manufacturing goods.

Absorption Costing

An accounting approach that factors in every manufacturing expense, like direct materials, direct labor, and both types of overhead (variable and fixed), into the product pricing.