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    Static Budgets and Flexible Budgets

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    Summer Company's static budget is based on a planned activity level of 25,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 20,000 units and one based on 30,000. The company actually produced and sold 29,000 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 29,000 units
    (b) A budget based on 25,000 units
    (c) A budget based on 30,000 units
    (d) A budget based on 20,000 units

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    Solution Preview

    This question is really deceiving. The static budget is based on a planned level of activity of 25,000 units. When management evaluates revenue and costs, it would be against the planned level, which is B. However, in this ...

    Solution Summary

    Summer Company's static budget is based on a planned activity level of 25,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 20,000 units and one based on 30,000. The company actually produced and sold 29,000 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 29,000 units
    (b) A budget based on 25,000 units
    (c) A budget based on 30,000 units
    (d) A budget based on 20,000 units

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