Caroline Farr is manager of a production department of Helling Company. Her department makes one product; the following information for her department was accumulated for 2012:

Static Budget	Actual Results
Number of units	100,000	97,000
Direct materials cost	$800,000	$792,000
Direct labor cost	$400,000	$380,000
Variable manufacturing overhead	$200,000	$199,000
Fixed manufacturing overhead	$290,000	$292,000
Total	$1,690,000	$1,663,000

Required: a) Prepare a flexible budget for the department's actual level of activity, 97,000 units. b) Use the flexible budget to evaluate Ms. Farr's performance. c) Why does the budget not include sales revenue and net income?