7-17 Flexible budget.Connor Company's budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per attach case are $40, $8, and $12, respectively. The president is pleased with the following performance report:

Direct materials

Direct manufacturing labor

Direct marketing (distribution) labor

Actual Costs

$364,000

78,000

110,000

Static Budget

$400,000

80,000

120,000

Variance

$36,000 F

2,000 F

10,000 F

Actual output was 8,800 attach cases. Assume all three direct-cost items shown are variable costs.

Is the president's pleasure justified? revised performance report that uses a flexible budget and a static budget.