Why does a flexible budget report provide a better basis for evaluating performance than the report based on static budget data?

Ratchet Company uses budgets in controlling costs. The August 2022 budget report for the company's Assembling Department is as follows. RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2022 Difference Favorable F Manufacturing Costs Budget Actual Unfavorable U Variable costs Direct materials $48,000 $47,000 $1,000 F Direct labor 54,000 51,200 2,800 F Indirect materials 24,000 24,200 200 U Indirect labor 18,000 17,500 500 F Utilities 15,000 14,900 100 F Maintenance 12,000 12,400 400 U Total variable 171,000 167,200 3,800 F Fixed costs Rent 12,000 12,000 -0-Supervision 17,000 17,000 -0- Depreciation 6,000 6.000 -0- Total fixed 35,000 35,000 -0- Total costs $206,000 $202,200 $3,800 F The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August because only 58,000 units were produced. Why does a flexible budget report provide a better basis for evaluating performance than the report based on static budget data? RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended August 31, 2022 Difference Favorable F Budget at Actual Costs Unfavorable U Units 58,000 Units 58,000 Units Variable costs Direct materials $46,400 $47,000 $600 UDirect labor 52,200 51,200 1,000 F Indirect materials 23,200 24,200 1,000 U Indirect labor 17,400 17,500 100 U Utilities 14,500 14,900 400 U Maintenance 11,600 12,400 800 U Total variable 165,300 167,200 1,900 U Fixed costs Rent 12,000 12,000 O Supervision 17,000 17,000 O Depreciation 6,000 6,000 0 Total fixed 35,000 35,000 O Total costs $200,300 $202,200 $1,900 U B I U T2 T TX E 66 0 Word(s)