1. The Company's actual manufacturing costs for the month of May totaled $144,000, while the budgeted manufacturing costs were $162,000. Comparison of the budgeted costs with actual amounts: a is not significant unless the budgeted and actual figures are based upon the same level of production. b Demonstrates that the Manufacturing Department operated very efficiently during May. Indicates that production cost per unit was 10% below budgeted cost per unit. d Indicates that the Company produced only 90% of the number of units budgeted for production in May. 2. A flexible budget is used to evaluate: a Costs that should have been incurred for a level of output achieved. b Costs that should have been incurred for a level of output considered to be normal. C How variable unit costs change as output changes. d How flexible management was at adapting to changes in business conditions. 3. The following information regarding Baron Company is available: Sales ........... $264,000 $99,000 Cost of sales .............. Operating expense..... Operating earnings Average invested capital...... $66,000 $660,000 ROI............. Return on sales ............... Capital turnover ................................... Compute the answers for items A-D