A soft drink company has three bottling plants throughout the country. Bottling o…continues
A soft drink company has three bottling plants throughout the country. Bottling occurs at the regional level because of the high cost of transporting bottled softdrinks. The parent company supplies each plant with the syrup. The bottling plants combine the syrup with carbonated soda to make and bottle the soft drinks. Thebottled soft drinks are then sent to regional grocery stores.The bottling plants are treated as costs centers. The managers of the bottling plants are evaluated basedon minimizing the cost per soft drink bottled and delivered. Each bottling plant uses the same equipment, but some produce more bottles of soft drinks because ofdifferent demand. The costs and output for each bottling plant are: A B CUnits Produced 10,000,000 20,000,000 30,000,000Variable Costs $ 200,000 $ 450,000 $650,000Fixed Costs $1,000,000 $1,000,000 $1,000,000a. Estimate the average cost per unit for each plant.b. Why would the manager of plant A be unhappy with using theaverage cost as the performance measure?c. What is an alternative performance measure that would make the manager of plant A happier?d. Under what circumstances mightthe average cost be a better performance measure?