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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,
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. Plant A Plant B Plant C Plant D Number of rolls processed 75000 85000 90000 100000 Revenues ($000) 1050 1190 1260 1400 Less Variable costs ($000) (390) (440) (580) (800) Fixed costs ($000) 600) (600) (600) (600) Profit ($000) 60 150 80 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
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