Bottom-up budgeting is based on?

• A. Top-down
• B. Rolling
• C. Bottom-up
• D. Incremental

Answer: (C)

Bottom-up budgeting is built from the ground up, starting with detailed forecasts and resource needs from each department or unit. Managers at the lower levels prepare their own cost and revenue estimates, and those inputs are aggregated to form the overall budget. This approach reflects what actually will be required to carry out plans, tends to be more accurate, and fosters accountability and buy-in because those responsible for the numbers helped create them.

In contrast, top-down budgeting starts with targets set by senior management and allocates resources downward, which can reduce accuracy at the operating level. Rolling budgeting is a forecasting technique updated regularly, not the basis of how the budget is formed. Incremental budgeting bases the new budget on last year’s numbers plus changes, rather than building it from detailed unit plans.