Reuse Products, LLC, manufactures plastic beverage bottles. The division that manufactures 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.

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 beprepared.

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Cost Category (Variable Unit Cost) Center costs: Master Budget North Actual South Actual $4,500,000 $3,880,000 $5,500,000 Plastic pellets ($0.009) Caps ($0.004) Direct labor ($0.002) Small tools and supplies ($0.0005) Depreciation and rent Total cost 1,990,000 2,000 2,000,000 1,000,000 865,000 240,000 280,000 480,000 $8,200,000 $7,373,000 $9,500,000 250,000 450,000 198,000 440,000 Performance measures: Bottles processed per hour Average daily pounds of scrap Bottles processed (in millions) 69,450 62,000 70,250 500 450 520