When actual selling costs far exceed budgeted costs
A) it is considered a bad situation, as the objective is to minimize selling costs.
B) it is considered a good situation, as high selling costs automatically mean high sales.
C) it is cause for concern, since costs are only allowed to exceed the budgeted amount by a small percentage.
D) it is cause for concern, since top management will cut future budgets to reduce costs.
E) it is cause for further analysis to discover whether a specified relationship between sales and selling costs was maintained.

Question

Quizplus · Accepted Answer

When actual selling costs far exceed budgeted costs, it is important to analyze the relationship between sales and selling costs. If the relationship was maintained, it could indicate that the higher selling costs led to higher sales, which could be beneficial for the company. However, if the relationship was not maintained, it would indicate a problem with cost control and could lead to future budget cuts. Therefore, further analysis is necessary to determine the impact of the higher selling costs.

When Actual Selling Costs Far Exceed Budgeted Costs