Spark Company's static budget is based on a planned activity level of 60,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 55,000 units and one based on 65,000. The company actually produced and sold 64,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets? Multiple Choice A) A budget based on 65,000 units B) A budget based on 64,000 units C) A budget based on 55,000 units

Question

Norris

Business

22 July, 09:25

Spark Company's static budget is based on a planned activity level of 60,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 55,000 units and one based on 65,000. The company actually produced and sold 64,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets? Multiple Choice A) A budget based on 65,000 units B) A budget based on 64,000 units C) A budget based on 55,000 units

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Answers (1)

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Isaias Greene · Answer 1

The management should compare the company's actual revenues and costs to a budget based on 64,000 units.

The correct answer is B

Explanation:

In performance evaluation, comparison should be done between the same level of activity. Since the actual level of activity is 64,000 units, the budget should be based on the same level of activity.