The budgeted costs for Connor Company for direct materials, direct production labor and direct distribution labor are $40, $8 and $12, respectively. The vice-president is deeply satisfied with the following performance report:

	Real Costs	Master Static Budget	Variation
Direct Materials	$364,000	$400,000	$36,000 F
Direct Labor Production	78,000	80,000	2,000 F
Direct Labor Distribution	110,00	120,000	10,000 F

Real number of units produced: 8,000

a. Prepare a performance evaluation report that uses a flexible and a static budget. Please assume that all the costs are variable. (The variance analysis detail is not required for this question).

b. Is the vice-presidents satisfaction justified?