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

question 140

Multiple Choice

Summer Company's static budget is based on a planned activity level of 25,000 units. Later, the company's management accountant prepared a budget based on 30,000 units. 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 30,000 units
• C) A budget based on 25,000 units
• D) Either a budget based on 29,000 units or a budget based on 25,000 units

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Definitions:

Weighted-Average Method

An inventory costing method that averages the cost of all similar goods available during a period to determine the value of inventory.

Conversion Costs

The combined costs of direct labor and manufacturing overhead, representing the costs necessary to convert raw materials into finished goods.

Weighted-Average Method

An inventory costing method that calculates cost of goods sold and ending inventory based on the average cost of all goods available for sale.

Cost Per Equivalent Unit

A calculation used in process costing to allocate costs to partially completed units, considering them as fractions of whole units.