Question

When preparing the operating budgets for a manufacturing company, the manufacturing overhead budget ________.

A) represents the last period cost to be considered
B) only includes variable manufacturing overhead
C) only computes the budgeted overhead cost for the year
D) includes costs that are projected by the cost accountant and the production manager

Answer 1

The manufacturing overhead budget in operating budgets for a manufacturing company includes both fixed and variable costs, projected by the cost accountant and production manager.

Step-by-step explanation:

When preparing the operating budgets for a manufacturing company, the manufacturing overhead budget includes costs that are projected by the cost accountant and the production manager. In the short-run, we can classify costs into fixed and variable. Fixed costs are expenses that do not change regardless of the amount of goods produced, such as rent, machinery, and equipment. These are contrasted with variable costs, which do change with the level of output, like the costs of raw materials and labor used in production. The manufacturing overhead budget encapsulates both of these cost types, considering the projected output and the cost of producing that output.