The budgeting process may be approached differently in various firms. Top-down budgeting has its inception with directives from senior management who prepare the budget for staff and assess performance based on objectives established at higher levels. Any additional compensation received occurs as a result of achieving budgetary targets imposed by others. In contrast, bottom-up budgeting reflects the predictions of cost, revenue, profit, and investment center managersproposed and approved by senior managers. Incentives are negotiated by managers proposing the budget rather than imposed by higher level executives.

Under which budgeting approach would flexible budgets more likely be used, and why?