Document B5Vqaa6bj9yBR5RkY7w04Em8o
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Mr. 2. Bell SOUND BROOK. N, J.
Mr. A. S. Amatangelo Mr. J. A. Grady, 3B Mr. G. R. Kraft Mr. j. R. Matthews Dr. A. 3. Steele, NYO
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Dispersion Resins Profit Center 383 In-Plant Distribution'Costs
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Dispersion Resins Profit Center 383 will be 'over charged at least $200, 000 for in-plant distribution costs in 1970. Since this Profit Center has an estimated ROI Income of $366, 000, elimination of these excessive charges will have an appreciable effect on profit in 197U.
These charges result from accounting assumptions or simplifications that lump all bag distribution costs under a single account. Costs are charged out of this account on a per-bag basis. Since dispersion resin bags are 40 pounds net and all other resm bags are 50 pounds net, this automatically guarantees that in-plant cost for dispersion resin is 125% of other resins on a per-pound basis. Purther investigation of actual cost for dispersion resin shows the following:
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024528
o Mr. E. BeU
-2- April 7, 1976 .
Bags
Filling
Loading Labor Material Total
Warehousing ' ha 8; Out Storage
^Stenciling, etc. Total
1970 Plant Standard Cost
* $0.1174
0.2533
0.3398
$0. 1405 0.0768.
0.1578
0.0540 0.0222 0.0268
Estimated
Actual Dispersion Resin Cost.
Domestic
Exncrt
o./ncf
$0.1200
$0.1700
' 0.1620 ojCrtf 6 P75/J
C.1620
0,2173 --
0^1030
$0.1405 0.0768
#
0.0540 0.0222 0.0268
0.2173 0.1030
GRAND TOTAL/Bag
$0.8683
*Not required for all shipments
$0.6023
$0.6523
Ratio Standard Cost/Actual
01.442
$1.3S1 .
Based on the apparent profitability of other resins such as solvent and PVA - PVB, there is certainly no need for a distribution subsidy from Dispersion Resins. If all packaging, loading, and warehousing costs must be pooled as they now are, they should at least be allocated on a per-pound shipped basis instead of per bag. This simple change should cut the Dispersion Res'in in- . plant distribution subsidy to other resins by $165, 000.
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Mr. E.. Bell
-3- April 7, 1970
Comparison of 1969 standard costs with, 1970 standard costs for filling, loading, and warehousing also raises a question regarding errors in generating 1970 standards. The standard cost of bag, filling, loading, and warehousing for vinyl resins in 19&9 was $0. 5170 per bag. The 1970. standards are 168% of this number at $0. 86836 per bag. An 8% increase in 1970 labor costs can hardly be the cause of such a sharp increase. F. W. S. costs for chemicals in steel drums rose only 2.4% from 1969 to 1970.
I hope the foregoing items will prompt an investigation of Dispersion Resin F. W. S. costs and lead to a more accurate and equitable system than we now have.
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Very truly yours.
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R. N. Wheeler, Jr.
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