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 Year 3 follow.

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.

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Static Budget Actual Results 60,000 kits $ 525,000 450,000 120,000 64,000 kits $ 655,000 Production in units Direct materials Direct labor Variable manufacturing overhead Total variable costs Fixed manufacturing overhead 464,000 135.000 1,095,000 525,000 1,254,000 512,500 $1,766,500 Total manufacturing cost $1,620,000