Evaluating a cost center including flexible budgeting concepts Koch Medical Equipment Company makes a blood pressure measuring kit. Albert Kaiser is the production manager. The production department€™s static budget and actual results for 2015 follow.

Required
a. Convert the static budget into a flexible budget.
b. Use the flexible budget to evaluate Mr. Kaiser€™s performance.
c. Explain why Mr. Kaiser€™s performance evaluation does not include sales revenue and netincome.

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Static Budget Actual Results Production in units Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing cost 60,000 kits $ 420,000 360,000 96,000 876,000 420,000 $1,296,000 64,000 kits 串524,000 371,200 108,000 1,003,200 410,000 $1,413,200