Bayfield Chemical Company manufactures chemicals 1, 2, 3, and 4 using five ingredients: ch...

Bayfield Chemical Company manufactures chemicals 1, 2, 3, and 4 using five ingredients: chemicals A, B, C, D, and E. The planned amount of input used to make 100 liters of each of the four products, the standard cost of the input chemicals, the amount of each of the input chemicals that is available for purchase, and the expected price received for each 100 liters of each product are shown in the following table.

Chemicals 1, 2, 3, and 4 are made in batches of either 2,000 or 5,000 liters. There are costs of setting up the blending tanks before a batch and cleaning them after a batch. These costs, along with the planned number of batches, are shown in the following table.

This planned production results in the following pattern of planned input chemical use.

With the exception of short-term variable inventory carrying costs, all the costs relating to the chemical-making operation are committed capacity-related costs that Bayfield Company feels are not avoidable in the short run. Therefore, they are ignored for short-run planning purposes. The inventory carrying costs are related to cost of carrying inventory including storage costs, the opportunity cost of capital tied up in inventory, obsolescence cost, loss, and waste. Input chemicals are purchased and arrive as needed, therefore they inflict no carrying cost in Bayfield Chemical. The inventory-related costs for chemicals 1, 2, 3, and 4 are estimated using the following steps.

For each of the four products, compute the weighted average number of units per batch by multiplying the number of units in each batch by the number of times that batch size is made, summing all the results, and dividing by the number of batches.

Since the sales of all four chemicals occur fairly uniformly during the planning period, for each of the four products, estimate the average inventory held by dividing the weighted average number of units per batch by two.

 For each of the four products, compute the inventory carrying cost by multiplying the average inventory held by $400, $800, $300, $500 for each of chemical 1, 2, 3, and 4, respectively.

Therefore the inventory carrying costs for the planned pattern of production are estimated as follows.

This planned production results in the following planned revenues, cost, and margin from this operation.

The following table shows the actual production during the period.

The following table shows the actual amount of input chemicals used, the price received for each product, and the cost of the input chemicals.

The following table shows the actual total input chemical use.

The following table shows the actual carrying costs.

The following table shows the actual total margin generated by the operations in this period.

Prepare a variance analysis of the operations in this period.