When an actual expense is greater than budgeted in Year 1 and there is no other new information, the Year 2 budget should use the

1. actual result of Year 1.
2. budgeted number from Year 1.
3. greater of the budgeted and actual numbers from Year 1.
4. average of the budgeted and actual numbers from Year 1.
5. lesser of the budgeted and actual numbers from Year 1.