Question

Spark Company's static budget is based on a planned activity level of 45,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 40,000 units and one based on 50,000. The company actually produced and sold 49,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets? a. A budget based on 40,000 units b. A budget based on 45,000 units c. A budget based on 49,000 units d. A budget based on 50,000 units.
No calculation is needed.

Answer 1

Answer:

c. A budget based on 49,000 units

Explanation:

Static budget is for 45,000 units,

Further with the information budget prepared with closest activity level, is the budget for 49,000 units as actual production is 50,000 units,

Therefore the actual comparison and analysis shall be based on this budget of 49,000 units as this is relatively most accurate and near by cost for each units produced.

Correct option is

c. A budget based on 49,000 units