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ACC- As a rising cost analyst at ACNE Chemical Company

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Question;As a rising cost analyst at ACNE Chemical Company, the CEO reached out to you for advice. ACNE Chemical continues to face increased competition from manufacturers in China. In an effort to understand and streamline costs, the CEO has asked you to compile cost data for a key product line in its Liquid segment, Radiance Chemical. The standard batch to manufacture 500 liters of Radiance Chemical is as follows:RADIANCE CHEMICALRaw MaterialsQuantity (in liters)Cost(per liter)Total CostAttanine100$2.00$200Battanine300$0.75$225Cattanine225$1.00$225TOTAL625$650The raw materials are highly flammable. There is 20% loss in the liquid volume during the manufacturing process. The finished bottle is put in 10 liter bottles for sale. Accordingly, the cost per bottle is $13.00 { [$650/500] x 10 liters}With demand running high, ACNE manufactured 4,000 bottles (40,000 liters) of Radiance Chemical in 2012. Materials used for the production of the 4,000 bottles included:RADIANCE CHEMICALRaw MaterialsQuantity(in liters)Total CostAttanine8,480$17,384Battanine25,200$17,640Cattanine18,540$16,686TOTAL52,220$51,710Problem Statement1. Please calculate the total raw material variance for Radiance Chemical. Additionally, derive:a. Material Price Varianceb. Material Mix Variancec. Material Yield Variance2. Explain how ACNE Chemical could use each of the three material variances ? prices, mix, yield ? to help control the cost to manufacture this liquid compound. Assume the following:Price variance: $2000 Unfavorable

 

Paper#42732 | Written in 18-Jul-2015

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