Spark Company's Static Budget Is Based on a Planned Activity

question 57

Multiple Choice

Spark Company's static budget is based on a planned activity level of 45,000 units.At the same time the static budget was prepared,the management accountant prepared two additional budgets,one based on 40,000 units and one based on 50,000.The company actually produced and sold 49,000 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 40,000 units
• B) A budget based on 45,000 units
• C) A budget based on 49,000 units
• D) A budget based on 50,000 units

---

Definitions:

Overapplied Overhead

A situation where the allocated overhead costs exceed the actual overhead expenses incurred.

Machine-Hours

A unit of measure indicating the total time production machinery is operated, used in calculating manufacturing costs and efficiencies.

Cost of Work

This could refer to the total expenses associated with performing a particular job or task, including labor, materials, and overhead costs.

Overapplied Overhead

A scenario in which the overhead costs assigned surpass the real overhead expenses incurred.