In preparing the overhead budget, many companies use

Question

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Many companies use a unit-based driver such as direct labor hours in overhead budgeting as it is a simple and effective method that can be easily traced and allocated to products or services. Activity-based costing and participative costing are different methods of cost accounting and are not specifically related to overhead budgeting. Using multiple drivers for a simple budget may unnecessarily complicate the process.

In Preparing the Overhead Budget, Many Companies Use