Use the Partial Income Statement Below to Answer the Following

question 4

Multiple Choice

Use the partial income statement below to answer the following group of questions

$\begin{array}{lrrr} & \text { Actual } & \text { Budget } & \text { Difference } \\\text { Revenue from Sales } & \$ 65000 & \$ 55000 & 18 \% \\\text { Sales Discounts } & -5000 & -2000 & 150 \% \\\text { Net Sales } & 60000 & 53000 & 13 \% \\\text { Advertising } & 4000 & 1000 & 300 \% \\\text { Cost of Goods Sold } & 25000 & 28000 & -11 \% \\& & & \\\text { Sales Commissions } & 6000 & 3000 & 100 \% \\\text { Other Expenses } & 4000 & 4000 & 0 \% \\\text { Total Expenses } & 39000 & 36000 & 8 \%\\\\\text{Net Income}&\underline{21000}&17000& \mathbf{2 4 \%}\end{array}$
-Which one of the following is not a reasonable explanation for these results -

• A)net income was higher than budgeted because sales were higher than budgeted
• B)net income was higher than budgeted because some expenses were lower than budgeted
• C)net income was higher than budgeted because the budget was not realistic
• D)net income may have been higher because inventory prices were raised after the budget was set

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Definitions:

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A challenge in research where a variable not accounted for influences the relationship between the studied variables, potentially leading to mistaken conclusions.

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