The performance of a manager responsible for a cost center is often evaluated based on their ability to control costs effectively and efficiently. In this scenario, we have a budgeted cost of $800,000 for the most recent fiscal year, and the actual cost incurred was $720,000. The question at hand is whether the manager did better than expected in controlling costs under different production scenarios, specifically when considering the nature of the cost (variable or fixed) and the level of actual production compared to the budgeted production.

Let’s analyze the options presented:

A. The cost is a variable cost, and actual production was 90% of budgeted production.

In this scenario, if the cost is indeed a variable cost, it means that the total cost is directly related to the level of production. If actual production was 90% of the budgeted production, it implies that the manager managed to maintain costs lower than the budget while producing almost as much as planned. This suggests effective cost control because the manager reduced costs while still achieving close to the expected output.

B. The cost is a variable cost, and actual production was equal to budgeted production.

If actual production matches the budgeted production and the cost is variable, it indicates that the manager met both the production and cost targets precisely as planned. While this demonstrates competent management, it doesn’t necessarily signify exceeding expectations in cost control. It’s more of a case where the manager met the set targets.

C. The cost is a variable cost, and actual production was 80% of budgeted production.

In this scenario, if actual production falls to 80% of the budgeted production while the cost remains below the budgeted cost of $800,000, it suggests effective cost control. The manager managed to reduce costs even though production levels were lower than planned, indicating efficiency in cost management.

D. None of the above.

This option doesn’t directly address the relationship between production levels and cost. It’s less informative for evaluating the manager’s performance.

In conclusion, among the given options, option A seems to be the most likely scenario where the manager did better than expected with controlling costs. When the cost is variable, and actual production reaches 90% of the budgeted production, it suggests that the manager effectively controlled costs while almost meeting production targets. However, it’s essential to note that without additional information, it’s challenging to make a definitive judgment about the manager’s performance. Factors such as the nature of the cost (variable or fixed), the industry, and the specific circumstances surrounding the budget and production levels would all play a role in a comprehensive evaluation.