If the expected level of activity is appreciably above or below the company's present capacity, it may be desirable to adjust fixed costs in the budget

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A manufacturing overhead budget is used to plan and control overhead costs in a manufacturing setting, including fixed costs such as rent and salaries and variable costs such as utilities and supplies. Therefore, it is important to adjust fixed costs in the budget if the expected level of activity is significantly above or below the company's present capacity.

If the Expected Level of Activity Is Appreciably Above or Below