Académique Documents
Professionnel Documents
Culture Documents
http://ocw.mit.edu
____________
For information about citing these materials or our Terms of Use, visit: ________________
http://ocw.mit.edu/terms.
Spring 2007
Bridgeton
Bridgeton
How has Bridgeton responded to these external
pressures?
One.
Cost allocation base is DL$.
Bridgeton
Exhibit K1
Fuel Tanks
Model Year
1988
1989
1987
Sales
Direct Materials
Direct labor
1000
1500
2000
3000
4000
5000
8000
9000
11000
12000
14000
Total cost
Profit
Profit%
$70,278
$15,125
$4,169
$1,302.79
$1,138.95
$615.16
$410.11
$1,489.27
$4,084.38
$1,007.37
$1,133.04
$859.58
$4,549.72
$1,643.99
$37,528
$32,750
47%
$75,196
$15,756
$4,238
$1,307.89
$1,143.36
$635.68
$423.73
$1,489.18
$4,098.26
$996.25
$1,134.48
$839.59
$4,704.21
$1,639.31
$38,406
$36,790
49%
COL%
5.9%
COL% is cost of labor as a percentage of sales
15.963 [Spring 2007]
5.6%
1990
$79,816
$16,312
$4,415
$1,817.27
$1,918.70
$662.40
$441.60
$2,400.41
$6,543.41
$1,221.08
$1,939.90
$1,027.35
$4,900.95
$2,617.30
$46,217
$33,599
42%
$83,535
$16,996
$4,599
$1,852.06
$1,933.26
$689.75
$459.83
$2,424.08
$6,611.84
$1,221.01
$1,952.50
$988.16
$5,114.60
$2,644.87
$47,487
$36,048
43%
5.5%
5.5%
Exhibit K2
Manifolds
1987
Sales
materials
Labor
1000
1500
2000
3000
4000
5000
8000
9000
11000
12000
14000
Total cost
Profit
Profit%
79,459
31,696
5,886
$1,839.35
$1,608.03
$868.52
$579.01
$2,102.62
$5,766.52
$1,422.26
$1,599.68
$1,213.59
$6,423.52
$2,321.06
63,326
16,133
20%
Model Year
1988
1989
84,776
33,016
6,027
$1,860.00
$1,626.01
$904.03
$602.60
$2,117.81
$5,828.28
$1,416.80
$1,613.38
$1,194.01
$6,690.01
$2,331.31
65,227
19,549
23%
89,323
34,392
6,278
$2,584.10
$2,728.34
$941.91
$627.94
$3,413.32
$9,304.54
$1,736.34
$2,758.48
$1,460.86
$6,969.01
$3,721.72
76,917
12,406
14%
COL%
7.4%
7.1%
COL% is cost of labor as a percentage of sales
15.963 [Spring 2007]
7.0%
1990
93,120
35,725
6,540
$2,633.72
$2,749.19
$980.86
$653.91
$3,447.16
$9,402.35
$1,736.33
$2,776.56
$1,405.20
$7,273.21
$3,761.13
79,085
14,035
15%
7.0%
Exhibit K3
Doors
1987
Sales
Materials
Labor
1000
1500
2000
3000
4000
5000
8000
9000
11000
12000
14000
Total cost
Profit
Profit%
Model Year
1988
1989
41,845
45,174
47,199
49,887
14,886
15,506
16,252
16,825
2,621
2,731
2,844
2,963
$819.05
$842.82 $1,170.63 $1,193.23
$716.04
$736.79 $1,235.96 $1,245.54
$386.75
$409.64
$426.69
$444.39
$257.83
$273.06
$284.46
$296.26
$936.28
$959.64 $1,546.27 $1,561.76
$2,567.80 $2,640.95 $4,215.05 $4,259.81
$633.32
$641.99
$786.58
$786.66
$712.33
$731.07 $1,249.62 $1,257.94
$540.40
$541.04
$661.79
$636.64
$2,860.35 $3,031.43 $3,157.04 $3,295.19
$1,033.55 $1,056.38 $1,685.98 $1,704.01
28,971
30,102
35,516
36,469
12,874
15,072
11,683
13,418
31%
33%
25%
27%
COL%
6.3%
6.0%
COL% is cost of labor as a percentage of sales
15.963 [Spring 2007]
1990
6.0%
5.9%
Exhibit K4
Mufflers
1987
Sales
Materials
Labor
1000
1500
2000
3000
4000
5000
8000
9000
11000
12000
14000
Total cost
Profit
Profit%
62,986
28,440
5,635
$1,760.91
$1,539.45
$831.48
$554.32
$2,012.96
$5,520.62
$1,361.61
$1,531.46
$1,161.84
$6,149.60
$2,222.08
58,721
4,265
7%
Model Year
1988
1989
66,266
29,525
5,766
$1,779.45
$1,555.59
$864.88
$576.51
$2,026.10
$5,575.88
$1,355.45
$1,543.51
$1,142.30
$6,400.30
$2,230.35
60,341
5,925
9%
1990
0
0
0
0
0
0
COL%
8.9%
8.7%
COL% is cost of labor as a percentage of sales
15.963 [Spring 2007]
Exhibit K5
Oil Pans
1987
Sales
Materials
Labor
1000
1500
2000
3000
4000
5000
8000
9000
11000
12000
14000
Total cost
Profit
Profit%
75,586
32,218
6,371
$1,990.91
$1,740.53
$940.09
$626.72
$2,275.87
$6,241.68
$1,539.45
$1,731.49
$1,313.59
$6,952.81
$2,512.31
66,454
9,132
12%
Model Year
1988
1989
79,658
33,560
6,532
$2,015.85
$1,762.25
$979.77
$653.10
$2,295.26
$6,316.63
$1,535.51
$1,748.56
$1,294.06
$7,250.56
$2,526.65
68,470
11,188
14%
1990
0
0
0
0
0
0
COL%
8.4%
8.2%
COL% is cost of labor as a percentage of sales
15.963 [Spring 2007]
Bridgeton
Despite cost cuts, why has profitability decreased after
1988 for the remaining products?
Is there a distinction between fixed costs and
unavoidable costs?
10
Bridgeton
What does this imply for the overhead allocation rate for
each overhead account?
11
$0.412
0.435
0.150
0.100
0.544
1.482
0.277
0.439
0.233
1.110
0.593
$0.309
0.270
0.150
0.100
0.351
0.967
0.235
0.268
0.198
1.110
0.387
1.33
1.61
1.00
1.00
1.55
1.53
1.18
1.64
1.17
1.00
1.53
12
Bridgeton
13
Sales
1000
1500
2000
3000
4000
5000
8000
9000
11000
12000
14000
Total
237233.77
Direct Materials
Direct Labor
Total Direct Costs
17708.68
4790.67
22499.35
37109.67
6812.93
43922.60
17418.20
3086.98
20505.18
72236.55
14690.58
86927.13
1887.48
1947.91
718.23
478.82
2447.94
6680.88
1220.92
1965.16
950.44
5337.49
2672.68
26307.95
2684.27
2770.20
1021.42
680.95
3481.32
9501.15
1736.32
2794.74
1351.66
7590.66
3800.93
37413.60
1216.24
1255.18
462.81
308.54
1577.39
4304.98
786.73
1266.30
612.44
3439.33
1722.20
16952.13
48807.30
38619.98
44%
81336.20
15742.20
16%
37457.31
15270.77
29%
5788.00
5973.28
2202.45
1468.30
7506.65
20487.01
3743.96
6026.20
2914.54
16367.47
8195.82
80673.69
549%
167600.82
69632.95
29%
14
1000
1500
2000
3000
4000
5000
8000
9000
11000
12000
14000
Direct Materials
Direct Labor
Total Direct Costs
17708.68
4790.67
22499.35
17418.20
3086.98
20505.18
3519.88
3632.56
718.23
478.82
4565.05
12458.86
1220.92
3664.74
950.44
5337.49
4984.16
41531.13
2268.12
2340.72
462.81
308.54
2941.60
8028.16
786.73
2361.46
612.44
3439.33
3211.66
26761.56
64030.48
23396.80
27%
35126.88
7877.65
43004.53
5788.00
5973.28
1181.03
787.36
7506.65
20487.01
2007.65
6026.20
1562.88
8776.82
8195.82
68292.69
867%
47266.74 111297.22
5461.35 28858.15
10%
21%
15
Bridgeton
Why does the profitability of doors drop from 29% to
10% if manifolds are outsourced?
Why does the profitability of fuel tanks drop from 44%
to 27% if manifolds are outsourced?
Why does overall profitability decline if manifolds are
outsourced?
16
Bridgeton
17
Bridgeton
18
Bridgeton
Revenues
Direct materials
Direct labor
Allocated overhead
Operating Income
Op. Inc. %
Allocation = 4 x DL$
Product A Product B
62
54
16
27
6
3
12
24
16
12
26%
22%
Allocation = 6 x DL$
Product A Product B
62
54
16
27
6
3
36
18
4
6
6%
11%
19
Bridgeton
20
Bridgeton
21
Bridgeton
22
Bridgeton
23
Bridgeton
Takeaways:
24