Cost Reduction Drivers for ABC Cream (1990-1995) PPT

This PPT slide, part of the 37-slide Variance Analysis PowerPoint presentation, presents a variance analysis focused on the cost per gallon of ice cream produced by ABC Cream from 1990 to 1995. It highlights how various factors contributed to the overall cost reduction during this period. The graph illustrates a significant decrease in costs, moving from $6.00 per gallon in 1990 to $4.50 by 1995.

Three primary components are identified as contributing to this reduction. First, an increase in production volumes is noted, which typically indicates economies of scale. This factor alone accounts for a decrease of $1.05 in cost, suggesting that higher output levels led to more efficient production processes.

Next, the analysis shows savings from raw materials purchasing, which contributed an additional reduction of $0.30. This could imply better supplier negotiations or changes in sourcing strategies that lowered material costs.

Lastly, a reduction in advertising expenses is also highlighted, resulting in a further decrease of $0.15. This might reflect a strategic decision to streamline marketing efforts or a shift in focus toward more cost-effective advertising channels.

Overall, the slide effectively communicates how these 3 factors collectively influenced the cost structure of ABC Cream, providing a clear visual representation of the financial impact over the specified years. For potential customers, this analysis serves as a valuable case study in understanding how operational adjustments can lead to significant cost efficiencies.

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Cost Reduction Supplier Negotiations Variance Analysis Production