To create a meaningful performance report,
A) actual costs are compared with the expected costs found in the static budget.
B) actual costs are calculated as a percentage of sales.
C) actual costs are compared with the prior year's actual costs.
D) expected costs of the static budget are compared with the expected costs of the flexible budget.
E) actual costs are compared with the expected costs at the same level of activity.

Question

Quizplus · Accepted Answer

The most meaningful performance report compares actual costs with the expected costs at the same level of activity. This is done by using a flexible budget, which adjusts the expected costs based on variations in activity levels. Comparing actual costs with the flexible budget allows for a more accurate analysis of performance and helps identify areas where costs can be improved. Option A compares actual costs with only one set of expected costs in a static budget, which may not reflect actual activity levels. Option B calculates costs as a percentage of sales, which may not be an accurate measure of performance if sales fluctuate significantly. Option C compares actual costs with the prior year's actual costs, which may not reflect changes in the current year's operations. Option D compares two different sets of expected costs (static vs. flexible), which may not be comparable or relevant to actual performance.

To Create a Meaningful Performance Report