Western Governors University (WGU) ACCT2020 D196 Principles of Financial and Managerial Accounting Practice Test

The manufacturing overhead budget includes both fixed and variable costs because it accounts for all costs associated with the manufacturing process that are not directly tied to the production of specific products. Fixed costs, such as rent, salaried employees, and insurance, remain constant regardless of production levels, while variable costs, like utilities and supplies, fluctuate with the volume of production. By incorporating both types of costs, the budget provides a comprehensive view of the overall expenses that a manufacturing business will face, enabling better planning and control over potential manufacturing costs. This holistic approach ensures that all expenses that contribute to production are adequately budgeted for, facilitating effective financial management and planning.