For a given year, the static budget of Norton and Cramden Company was developed based on forecasted sales of 12,000 units. Actual sales for the year totaled 14,000 units. The preparation of a flexible budget to evaluate performance by responsibility center should be based on:
A) 12,000 units.
B) 14,000 units.
C) The 13,000 units average of 12,000 and 14,000 units.
D) Some other amount.

Question

Quizplus · Accepted Answer

A flexible budget is adjusted to reflect the actual level of activity, in this case, the actual sales of 14,000 units, to provide a more accurate comparison of budgeted to actual performance.

For a Given Year, the Static Budget of Norton and Cramden