Spark Company's static budget is based on a planned activity level of 60,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 55,000 units and one based on 65,000. The company actually produced and sold 64,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?

Spark Company's static budget is based on a planned activity level of 60,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 55,000 units and one based on 65,000. The company actually produced and sold 64,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?

Explanation

For performance evaluation, management compares actual results to a flexible budget based on the actual volume of activity, which, in this situation, is 64,000 units.

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units:
 

	Per Unit
Revenue	$	9.00
Variable costs		4.00
Contribution margin	$	5.00
Fixed costs		3.00
Net income	$	2.00

 

If actual production totals 9,000 units, which is within the relevant range, the flexible budget would show fixed costs of: 

Explanation

Based on 8,000 units:
Total budgeted fixed costs = 8,000 units × $3.00 per unit = $24,000
This amount is unchanged if the flexible budget is prepared at a level of 9,000 units.

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