Document 3obMQ91GwgXyRJQa3RjRmbra

Interoffice Communication to R. D. Gamblin Frm J. H. Brunson Djte October 23, 1980 subject Explanation of Variances - September, 1980 During the month of September the plant produced 55,778,985 pounds of VCM and 88,821,175 pounds of EDO. The variances from standard were as follows: August Year-To-Date Efficiency Pri ce Total Efficiency Pri ce Total EDC $174,529 VCM 5,079 Inc. (46,246) Subtotal $133,362 Fixed Costs Total $(548,821) (49,312) (4,494) $(602,627) $(374,292) (44,233) (50,740) $(469,265) 197,332 $(271 ,933) $ 826,743 $(4,489,408) $(3,662,665) 39,964 (67,843) (27,879) (396,589) (7,127) (403,716) $ 470,118 $(4,564,378)$(4,094,260) 418,134 $(3,676,126) FIXED COST VARIANCE The favorable variance of $197,332 was due primarily to Operating Payroll $11.5M, Maintenance Payroll - $127.9M, Rentals - $13.8M, and Maintenance Contract Costs - $52.1M. These variances reflect the fact that the plant turnaround was budgeted for the third quarter, but will not be taken during the quarter. These favorable variances were partially offset by unfavorable variances for Employee Benefits - $10.6M and Maintenance Materials - $14.8M. Smaller variances accounted for the remaining dif ference between budget and actual cost. The major variances are explained on attached sheet. VARIABLE COST VARIANCES The total variable cost variance for September (including incinerator IPA variances) was $469,265 unfavorable. The net unfavorable variance con sisted of the following: Raw Materials and By-Products Processing Supplies Utilities By-Products Handling September, 1980 EDC/VCM Incinerators $(338,053) $ (6,757) (6,330) (114,874) (13,914) (30,069) 40,732 $(418,525) $(50,740) CCR 000008995 R. D. Gamblin Page 2 October 23, 1980 The net price variance was unfavorable at $602,627. In the explanations which follow, the incinerator variances are discussed as a separate topic. EDC/VCM The EDC/VCM unit efficiency variance was $179.6M favorable in September. Favorable raw material efficiencies ($134.6M for ethylene and $25.2M for chlorine plus HC1) were offset by unfavorable processing supplies and utilities efficiency variances of $12.9M and $11.7M, respectively. A favorable by-products handling efficiency variance of $44.5M also contri buted to the overall favorable EDC/VCM unit efficiency variance. Incinerators The incineration unit efficiency variance was $46.2M unfavorable in Sep tember. This variance was due primarily to unfavorable light ends, lime stone, and natural gas efficiency variances of $26.5M, $12.1M, and $24.9M, respectively. These unfavorable variances were partially offset by a favorable HC1 variance of $19.7M. The overall variance can be attributed to limited light ends firing and the fact that the concentration unit was not in operation. J. H. Brunson APPROVED: J. A. DeBernardi sc Enc CC + enc: JAD-JRH-TRC ^0000089 FIXED COSTS Operating Payroll - $11,474 Favorable The favorable variance was due to overtime less than budget - $9.8M and maintenance paid non-work less than budget $1.6M. Maintenance Payroll - $127,949 Favorable The favorable variance was due to the budgeted third quarter turnaround being rescheduled in the fourth quarter - $147.4M. This was partially offset by turnaround preparation charges - $15.9M and to less labor used on capital projects than budgeted - $1.8M. Employee Benefits - $10,577 Unfavorable The unfavorable variance was due to rate used to calculate the benefits being 3% more than budget - $7.0M and the base salary used to calculate the benefits being more than budget - $3.5M. Rent and Rentals - $13,798 Favorable The favorable variance was due primarily to the budgeted third quarter turnaround rentals being spread evenly throughout the quarter - $16.9M. Maintenance Materials - $14,755 Unfavorable The unfavorable variance is due to costs greater than budget in the extraordinary category - $54.5M, and the ordinary category - $12.0M. The extraordinary costs above consisted of unbudgeted furnace tubes $30.9M, unbudgeted BL-302 intercooler bundle replacements - $17.1M, and unbudgeted instrument air dryer repairs - $8.3M. The ordinary costs consisted of costs greater than budget in the warehouse - $8.6M, and pipe and valves - $6.4M. This was partially offset by the third quarter turn around being rescheduled in the fourth quarter - $46.2M, and costs less than budget in the incinerator area - $5.1M. Maintenance Contract Costs - $52,124 Favorable The favorable variance was due to the budgeted third quarter turnaround being rescheduled in the fourth quarter - $53.9M. CCft OOO008997 VARIABLE COSTS EDC/VCM - $418,525 Unfavorable Raw Materials and By-Products - $338>053 Unfavorable The chlorine and ethylene price variances for September were $200.3M un favorable and $297.3M unfavorable, respectively. The chlorine plus HC1 efficiency variance was $25.2M favorable and the ethylene efficiency variance was $134.6M favorable.. The favorable chlorine plus HC1 efficiency variance was due to favorable conversion in the oxy finishing reactor, R304. The favorable ethylene efficiency variance was due to favorable con version in R-304 and metering discrepancies. Processing Supplies - $6,330 Unfavorable Oxychlorination catalyst yielded a favorable price variance of $4.3M. Alu mina catalyst yielded a favorable efficiency variance of $7.6M because amortization of the catalyst which was charged in the oxy vent clean-up reactor, R-305, during September, 1978 was completed in March, 1980. Hydro genation catalyst yielded an unfavorable efficiency variance of $6.1M due to the unbudgeted amortization of catalyst that was charged in the hydro genation reactor, R-300, in March, 1980. Caustic solution usage yielded an unfavorable price variance of $7.7M and an unfavorable efficiency vari ance of $12.5M. The unfavorable efficiency variance was due to the poor quality of available limestone and excessive neutralization requirements resulting from the deteriorating condition of the oxy section catalyst. Nitrogen usage yielded a favorable price variance of $5.1M and a favorable efficiency variance of $4.1M. The favorable efficiency variance was due to low rail car purging-requirements. Cooling water chemicals efficiency vari ance was $3.9M unfavorable due to the charge to this category of material being used on an experimental basis in the light ends column. The effi ciency variance for the category of "Other" items was unfavorable at $4.2M due to the charge to this category of material which was used at the incin erator and which should have been charged to the boiler water chemicals category of the incinerator I PA. Utilities - $114,874 Unfavorable Price variances for electricity, steam, and natural gas were $10.3M unfa vorable, $81.6M unfavorable, and $11.3M unfavorable, respectively. The electricity efficiency variance was unfavorable at $7.8M due to normal consumption in a month of low production. The steam efficiency variance was $7.7M unfavorable due to the low production rate and the revision of the steam accounting factors at the LCCP steam plant in May, 1980. The natural gas efficiency variance was $3.7M favorable due to the fact a fa vorable light ends concentration was maintained in the furnace feed. By-Products Handling - $40,732 Favorable The cost of tars disposal yielded an unfavorable price variance of $3.8M and a favorable efficiency variance of $9.8M. The favorable efficiency CCR 000008998 variance was due to low tars production in the EDC/VCM unit. Light ends to the incinerators yielded a favorable efficiency variance of $33.7M due to the fact that routine light ends firing has yet to be instituted in the incineration area. Incinerators - $50,740 Unfavorable Light ends from the EDC section yielded an unfavorable efficiency variance of $26.5M due to limited light ends firing. HC1 from the VCM section yield ed a favorable efficiency variance of $19.7M due to the fact the concentra tion unit was not in operation during September. Limestone yielded an un favorable price variance of $3.3M and an unfavorable efficiency variance of $12.1M which was also due to the fact the concentration unit was not in operation during the month. The natural gas efficiency variance was $24.9M unfavorable due to limited light ends firing. CCR 000008999