ABC Company operates four film developing plants in upstate Pennsylvania. The four plants are identical. They...

 

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ABC Company operates four film developing plants in upstate Pennsylvania. The four plants are identical. They employ the same production technology, process the same mix, and buy raw materials from the same companies at the same prices. Wage rates are also the same at four plants. In reviewing the operating results for November, the newly hired assistant controller, Jason Bauer, became quite confused over the numbers. Number of rolls processed Revenues ($000) Less Variable costs ($000) Fixed costs ($000) Profit ($000) Plant A 75000 1050 (390) (600) 60 Plant B 85000 1190 (440) (600) 150 Plant C 90000 1260 (580) (600) 80 Plant D 100000 1400 (800) (600) 0 Jason remembered from his Managerial Accounting class that as volume increases, the average fixed cost per unit falls, and so Jason expected Plant D to be more profitable that Plants A and B. But numbers tell a different story. REQUIRED: Write a concise but clear memo to Jason to help him understand what is going on and clear his confusion. Justify your points with appropriate calculations. ABC Company operates four film developing plants in upstate Pennsylvania. The four plants are identical. They employ the same production technology, process the same mix, and buy raw materials from the same companies at the same prices. Wage rates are also the same at four plants. In reviewing the operating results for November, the newly hired assistant controller, Jason Bauer, became quite confused over the numbers. Number of rolls processed Revenues ($000) Less Variable costs ($000) Fixed costs ($000) Profit ($000) Plant A 75000 1050 (390) (600) 60 Plant B 85000 1190 (440) (600) 150 Plant C 90000 1260 (580) (600) 80 Plant D 100000 1400 (800) (600) 0 Jason remembered from his Managerial Accounting class that as volume increases, the average fixed cost per unit falls, and so Jason expected Plant D to be more profitable that Plants A and B. But numbers tell a different story. REQUIRED: Write a concise but clear memo to Jason to help him understand what is going on and clear his confusion. Justify your points with appropriate calculations.

Answer rating: 100% (QA)

Memo To Jason Bauer Assistant Controller From XYZ Senior Accountant Date XXXX Subject Analysis of Plant Profitability Dear Jason I understand your con... View the full answer