Canton Company estimates sales of 12,000 units for the upcoming period. At this sales volume its budgeted income is as follows:
During the period the company actually produced and sold 14,000 units.
Required:The manager now wants to evaluate the company's performance by comparing actual costs and revenues to those shown above but you have advised against it. Explain your reasoning.Prepare a flexible budget based on 14,000 units.If management compares actual revenues and costs to the appropriate flexible budget, will they be able to fully understand what went right and what went wrong with the operation during the period? Why or why not?

Question

Canton Company estimates sales of 12,000 units for the upcoming period. At this sales volume its budgeted income is as follows:
  During the period the company actually produced and sold 14,000 units.
Required:The manager now wants to evaluate the company's performance by comparing actual costs and revenues to those shown above but you have advised against it. Explain your reasoning.Prepare a flexible budget based on 14,000 units.If management compares actual revenues and costs to the appropriate flexible budget, will they be able to fully understand what went right and what went wrong with the operation during the period? Why or why not?

Quizplus · Accepted Answer

The Answer of Canton Company estimates sales of 12,000 units for the upcoming period. At this sales volume its budgeted income is as follows:
  During the period the company actually produced and sold 14,000 units.
Required:The manager now wants to evaluate the company's performance by comparing actual costs and revenues to those shown above but you have advised against it. Explain your reasoning.Prepare a flexible budget based on 14,000 units.If management compares actual revenues and costs to the appropriate flexible budget, will they be able to fully understand what went right and what went wrong with the operation during the period? Why or why not?

Canton Company Estimates Sales of 12,000 Units for the Upcoming