Evaluating a cost center (including flexible budgeting concepts) Doug Oliver, president of Oliver Door Products Company, is evaluating the performance of Gregory Wilson, the plant manager, for the last fiscal year. Mr. Oliver is concerned that production costs exceeded budget by nearly $35,000. He has available the 2011 static budget for the production plant, as well as the actual results, both of which follow:

Required
a. Convert the static budget into a flexible budget.
b. Use the flexible budget to evaluate Mr. Wilson's performance.
c. Explain why Mr. Wilson's performance evaluation doesn't include sales revenue and net income .

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Static Budget Actual Results 5,000 Doors $ 350,000 5,250 Doors $ 362,000 222,000 121,800 Production in units Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead Total manufacturing cost 120,000 670,000 705,800 409,000 410,000 $1,080,000 $1,114,800