Flexible-budget preparation and analysis. Bank Management Printers, Inc., produces luxury chequebooks with three cheques and stubs per page. Each chequebook is designed for an individual customer and is ordered through the customer’s bank. The company’s operating budget for $eptember 2007 included these data:

Number of chequebooks 15,000 Selling price per book $ 24 Variable costs per book $ 9.60 Total fixed costs for the month $174,000 The actual results for September 2007 were Number of chequebooks produced and sold 12,000 Average selling price per book $ 25.20 Variable costs per book $ 8.40 Total fixed costs for the month $180,000 The executive vice-president of the company observed that the operating income for September was much less than anticipated, despite a higher-than-budgeted selling price and a lower-than-budgeted variable cost per unit. You have been asked to provide explanations for the disappointing September results.

Bank Management develops its flexible-budget-based budgeted revenue per output unit and variable costs per output unit without a detailed analysis of budgeted inputs.

Required 1. Prepare a Level 1 analysis ofthe September performance.
2. Prepare a Level 2 analysis of the September performance.
3. Why might Bank Management find the Level 2 analysis more informative than the Level 1 analysis? Explain your answer.