Prepare a performance report for the north plant

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Reference no: EM13889829

Reuse Products, LLC, manufactures plastic beverage bottles. The division that man- ufactures water bottles for the North American market has two plants that operate 24 hours a day, 365 days a year. The plants are evaluated as cost centers. Small tools and supplies are considered variable overhead. Depreciation and rent are considered fixed overhead. For the month, the master budget for a plant and the actual operating results of the two North American plants, North and South, follow.

Cost Category (Variable Unit Cost)

Master Budget

north Actual

south Actual

Center costs:




Plastic pellets ($0.009)

$4,500,000

$3,880,000

$5,500,000

Caps ($0.004)

2,000,000

1,990,000

2,000,000

Direct labor ($0.002)

1,000,000

865,000

1,240,000

Small tools and supplies ($0.0005)

250,000

198,000

280,000

Depreciation and rent

450,000

440,000

480,000

Total cost

$8,200,000

$7,373,000

$9,500,000

Performance measures:




Bottles processed per hour

69,450

62,000

70,250

Average daily pounds of scrap

5

6

7

Bottles processed (in millions)

500

450

520

Required:

1. Prepare a performance report for the North plant. Include a flexible budget and variance analysis.

2. Prepare a performance report for the South plant. Include a flexible budget and variance analysis.

3. Compare the two plants, and comment on their performance.

4. Explain why a flexible budget should be prepared.

Reference no: EM13889829

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