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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Evaluating Cost Center Performance
P 1. Beverage Products, LLC, manufactures metal beverage containers. The division that manufactures soft-drink beverage cans 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. The master budget for a plant and the operating results of the two North American plants, East Coast and West Coast, are as follows:
|
Center costs |
Master Budget |
East Coast |
West Coast |
|
Rolled aluminum ($0.01) |
$4,000,000 |
$3,492,000 |
$5,040,000 |
|
Lids ($0.005) |
2,000,000 |
1,980,000 |
2,016,000 |
|
Direct labor ($0.0025) |
1,000,000 |
864,000 |
1,260,000 |
|
Small tools and supplies ($0.0013) |
520,000 |
432,000 |
588,000 |
|
Depreciation and rent |
480,000 |
480,000 |
480,000 |
|
Total cost |
$8,000,000 |
$7,248,000 |
$9,384,000 |
Â
|
Performance measures |
 |  |  | |
|
Cans processed per hour |
45,662 |
41,096 |
47,945 |
|
|
Average daily pounds of scrap metal |
5 |
6 |
7 |
|
|
Cans processed (in millions) |
400 |
360 |
420 |
|
| Â | Â | Â | Â | Â |
Required
1. Prepare a performance report for the East Coast plant. Include a flexible budget and variance analysis.
2. Prepare a performance report for the West Coast 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. Traditional and Variable Costing Income Statements
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