Final answer:
The incorrect statement regarding the manufacturing overhead budget is that depreciation on manufacturing equipment is not included. Both fixed and variable costs, including depreciation, are considered in the budgeting process.
Step-by-step explanation:
The statement regarding the manufacturing overhead budget that is incorrect is: D) Depreciation on manufacturing equipment is not included because the production manager has no control over that cost allocation. In creating a manufacturing overhead budget, both fixed and variable costs are considered, and depreciation on manufacturing equipment typically falls under fixed costs. Fixed costs, like depreciation, are costs that do not change with the level of production, which means they are the same whether you produce a lot or a little. Although the production manager may not control these costs, they are still essential for full and accurate financial planning and are therefore included in the budget.
The cost accountant and the production manager work together to project variable and fixed manufacturing costs. This collaborative effort ensures that all factors, including those that are within the production manager's control (like labour or raw materials usage) and those that are not (like depreciation), are accounted for in the overhead budget.