Final answer:
The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity. Actual costs should be compared to what the costs should have been for the actual level of activity to assess how well a manager has controlled costs. Therefore, the correct answer is option a. i is true; ii is true.
Step-by-step explanation:
The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity. A static budget is prepared based on a single level of activity and does not account for any fluctuations in production or sales. On the other hand, a flexible budget is designed to adjust for changes in activity levels, allowing for more accurate budgeting based on the actual level of activity.
To assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity. This can be done by comparing the actual costs to the flexible budget costs, which take into account the actual level of activity. By doing this comparison, any significant variances can be identified and analyzed to determine the effectiveness of cost control measures.
Therefore, the correct answer is option a. i is true; ii is true.