Question

Spark Company's static budget is based on a planned activity level of 36,000 units. At the...

Spark Company's static budget is based on a planned activity level of 36,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 31,000 units and one based on 41,000. The company actually produced and sold 40,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?

  • A budget based on 40,000 units

  • A budget based on 36,000 units

  • A budget based on 31,000 units

  • A budget based on 41,000 units

Business   Accounting   
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Answer #1

Actual are always compared with the budgted figure to find out the variance & analyse the reason for such variances.

In the present situation, company static budget is based on planned activity level of 36000 units & company actually produced & sold 40000 units.

In evaluating the performance companies should compay actual revenue & cost with the budgeted activity of 36000 units.

According, option (b) i.e. 36000 units is the correct answer.

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