Use the following to answer questions:
Perry's Sandwich Department had the following summarized results for the month ending April 30:

-If the budget were based on the sale of 13,000 sandwiches at $2.00 each and the actual results reflect the sale of 13,000 sandwiches, identify the most appropriate conclusion in the report to management
A) If costs as a percentage of revenues had remained at the budgeted level, net income would have declined
B) If costs as a percentage of revenues remain at the actual level any increase in revenues would probably . be matched by a decrease in departmental net income
C) If costs as a percentage of revenues had remained at the budgeted level, net income would be $492 above budget
D) If costs as a percentage of revenues had remained at the budgeted levels, net income would be $4,000 above budget

Question

Use the following to answer questions:
Perry's Sandwich Department had the following summarized results for the month ending April 30:
 
-If the budget were based on the sale of 13,000 sandwiches at $2.00 each and the actual results reflect the sale of 13,000 sandwiches, identify the most appropriate conclusion in the report to management
A) If costs as a percentage of revenues had remained at the budgeted level, net income would have declined 
B) If costs as a percentage of revenues remain at the actual level any increase in revenues would probably . be matched by a decrease in departmental net income 
C) If costs as a percentage of revenues had remained at the budgeted level, net income would be $492 above budget 
D) If costs as a percentage of revenues had remained at the budgeted levels, net income would be $4,000 above budget

Quizplus · Accepted Answer

Given that the sales volume did not change from the budgeted amount, any difference in net income would be due to changes in costs relative to revenues, not changes in sales volume. If costs as a percentage of revenues had remained at the budgeted level, it implies that the actual costs were higher than planned, leading to a lower net income than budgeted. Therefore, if costs had remained at the budgeted level, net income would indeed be higher than what was actually achieved, making option C the most appropriate conclusion. Options A, B, and D suggest scenarios that are not directly related to the premise of costs relative to budgeted revenues and sales volume being constant.

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