The GM of Luotang Power, a coal-fired power plant situated in central China, reviews annual results before a conference using the board of company directors. He thought the organization carried out well throughout the entire year and both plant availability and gas mileage had enhanced over the year before. However, the positive performance doesn't show within the financial results and that he must investigate before showing towards the board. He views carrying out a variance analysis to higher understand plant performance in comparison to the year before. Also, he examines the contractual arrangement the guarana plant has using the provincial power company for any minimum acquisition of electricity to supplement regional demand. The organization have been effective at selling excess electricity towards the power plant but in the last 12 several weeks, demand from customers has decreased. Students must develop a quantitative research into the plant's performance and make preparations recommendations to enhance confirming and evaluation from the plant's performance. This case may be used within an opening managing accounting course to understand more about variance analysis and incentives in contracts.
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