Question

TP6.

LO 7.4The management of Hess, Inc., is developing a flexible budget for the upcoming year. It was not pleased with the small amount of net income the budget showed at all sales levels and is contemplating using a less expensive material. This action reduces direct material cost by $1 per unit. What would be the effects on financial statements and a flexible budget if management takes this approach? Are there other factors that need to be considered?

Answer 1

Yes, common and operational expenses.

The effect on financial statement would be dynamic, as some figures would fluctuate based on volume

Step-by-step explanation:

A flexible budget is very much adjustable based on the level of production activity. Hence this will also reflect on the financial statement, if management takes this approach