Question

Campers Unlimited sells 15 campers in their slow months and 35 campers in their busy months. If Campers Unlimited wanted to develop a flexible budget, what interval should they use between each activity index?

A : 15 units

B : 5 units

C : 1 unit

D : 20 units

Answer 1

Campers Unlimited sells 15 campers in their slow months and 35 campers in their busy months.
Means theie lowest sales qty, will be 15 and their highest sales will be 35.
Then there must be activity levels exist between these two, which are during normal working months.
So for preparing Flexbile budget, interval they should use between each activity index must be 5 units i.e B.

Explanation:
A). Here If we take 15 units then there will be only one activity index between the lowest and highest which is 30 units and it is also not in line with the consistency, means if we again add 15 units interval then the next activity Index must be 45 units but the busiest activity index is 35 units. Hence it is not Suitable.

B). 5 units: If we take 5units interval, it complies with the consistency between the 15 units and 35 units activity. There will be 3 activity levels between lowest and highest i.e 20 units, 25 units and 30 units. Hence this is the most suitable interval for preparing the flexible budget.

C). 1 unit. Flexible budget is based on activity levels and not on basis of each additional unit of sale. Hence this is also not suitable.

D). 20 Units: If we take interval of 20 units, then we will miss the activity index of sale units during the normal working months because it starts with 15 units and directly ends with 35 units. Hence this is also not suitable.