Exercise 9-5A Evaluating a cost center including flexible budgeting concepts Muskrat Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department's static budget and actual results for 2019 follow:
Static Budget Actual Results
Production in units............................................. 60,000 kits...............64,000 kits
Direct materials.................................................. $ 525,000................ $ 655,000
Direct labor......................................................... 450,000.................. 464,000
Variable manufacturing overhead................................ 120,000..................135,000
Total variable costs............................................... 1,095,000............... 1,254,000
Fixed manufacturing overhead................................... 525,000.................. 512,500
Total manufacturing cost...................................... $1,620,000................ $1,766,500
Required
a. Convert the static budget into a flexible budget.
b. Use the flexible budget to evaluate Mr. McCoy's performance.
c. Explain why Mr. McCoy's performance evaluation does not include sales revenue and net income.