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The Plant of XYZ Ltd has the following staffing: one plant manager, four assistant plant manager, and thirty department managers. One of the assistant plant managers made the following comments at a meeting of the department managers that report to him. These unfavourable production volume variances are killing our performance. When these variances are put on a per unit basis and added to our standard costs, the resulting product cost makes us look like the worst plant in the company. If we dont get our unit costs down and look more efficient, we will be in deep trouble. The plant might be closed. This is what we should do. I want these departments to run at 100% of normal output. If we dont have specific orders, make some of the components that are used for our more popular products. We can store the stuff we will have to use it some time. Meanwhile that will boost our output, eliminate the unfavourable production volume variances, and get our unit costs back to where they should be. Required: Is the assistant plant managers suggestion going to improve the plants performance? Explain why or why not.

The Plant of XYZ Ltd has the following staffing: one plant manager, four assistant plant manager, and thirty department managers. One of the assistant plant managers made the following comments at a meeting of the department managers that report to him.

These unfavourable production volume variances are killing our performance. When these variances are put on a per unit basis and added to our standard costs, the resulting product cost makes us look like the worst plant in the company. If we dont get our unit costs down and look more efficient, we will be in deep trouble. The plant might be closed.

This is what we should do. I want these departments to run at 100% of normal output. If we dont have specific orders, make some of the components that are used for our more popular products. We can store the stuff we will have to use it some time. Meanwhile that will boost our output, eliminate the unfavourable production volume variances, and get our unit costs back to where they should be.

Required:

Is the assistant plant managers suggestion going to improve the plants performance? Explain why or why not.

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