Chance Company Estimates Sales of 13,000 Units for the Upcoming

question 28

Essay

Chance Company estimates sales of 13,000 units for the upcoming period. At this sales volume its budgeted income is as follows:
During the period the company actually produced and sold 14,000 units.
Required:
1) The manager now wants to evaluate the company's performance by comparing actual costs and revenues to those shown above but you have advised against it. Explain your reasoning.
2) Prepare a flexible budget based on 14,000 units.
3) If management compares actual revenues and costs to the appropriate flexible budget, will they be able to fully understand what went right and what went wrong with the operation during the period? Why or why not?

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Definitions:

Human Resources

The department within a business that deals with the recruitment, management, and direction of people who work in the organization.

Advertising Expenditures

The total amount of money spent on promoting a product, service, or brand through various advertising channels and platforms.

Customer Demand

The desire and willingness of consumers to purchase goods or services at a given price over a specific time period.

Management's Commitment

The dedication and proactive involvement of a company's management team in implementing and achieving strategic goals, often reflecting the organization's values and culture.