The Major Difference Between the Top-Down and Bottom-Up Budgeting Process

question 9

Multiple Choice

The major difference between the top-down and bottom-up budgeting process is the _____.

• A)resulting budget amount obtained
• B)degree of employee/manager participation
• C)starting amount in the budget
• D)absence or presence of opportunity costs in the budgetary process

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Definitions:

Predetermined Overhead Rate

An estimated rate used to assign overhead costs to products or job orders, based on a pre-established formula or basis.

Fixed Manufacturing Overhead

Regular, static expenses associated with operating a manufacturing facility, such as rent, utilities, and salaries, that do not vary with the level of production.

Direct Labor-hours

Direct labor-hours are the total hours worked by employees directly involved in the manufacturing process, used as a measure for allocating labor costs to products.

Predetermined Overhead Rate

The rate estimated at the beginning of a period to allocate overhead to products or job orders, calculated based on expected overhead costs and an allocation base.