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

Question

Quizplus · Accepted Answer

Since the company actually produced and sold 49,000 units, comparing actual revenues and costs to a budget based on 49,000 units would provide the most accurate and relevant evaluation of performance. This approach allows for a direct comparison between planned and actual figures at the same level of activity.

Spark Company's Static Budget Is Based on a Planned Activity