1. The actual production volume is usually larger than the budged production volume. Please explain how the conservative estimate affects financial statements (i.e., the profit statement and balance sheet). In addition to the financial effects, comment on the pros and cons of such conservative estimates on the operational decisions (e.g., marketing, investment, or pricing decisions). 

• Please assume other things being equal and focus your discussion on the effect of the
• estimate of production volume.
• Identify the important assumptions that your argument is based on if needed.