The manager of the manufacturing unit of an organization is responsible for the costs of the manufacturing unit. The president is in the procedure of deciding whether to evaluate the manager of the manufacturing unit by the variable cost per unit or the average cost per unit. Quality and timely delivery could be used in conjunction with the cost calculate to reward the manager.
1. What problems are related with using the average cost per unit as a performance measure?
2. What problems are related with using the variable cost per unit as a performance measure?