How to Calculate Material Cost, Unit Labor Cost, and Fully Allocated Cost of a Sheave

What factors need to be considered in calculating the material cost, unit labor cost, and fully allocated cost of a sheave?

Calculating Material Cost of a Sheave

To calculate the material cost of a sheave, we need to consider the following factors: - The length of bar stock needed per sheave: Since 5% of the steel is lost in the manufacturing process, we need to account for this. So, the length of bar stock needed per sheave is 1.05 times the length of a sheave. - The cost of bar stock: The bar stock costs $3.00 per pound, and it has a density of 493 pounds per cubic foot. Since we know the diameter of the bar stock is 6 inches, we can calculate the weight of the bar stock needed per sheave. - The scrap value of steel: 1 out of 10 sheaves needs to be scrapped, so we need to consider the scrap value of steel as well.

Calculating Unit Labor Cost of a Sheave

To calculate the unit labor cost of a sheave, we need to consider the following factors: - The time it takes to produce a sheave: According to the time study, it takes 1 man-hour to produce a sheave. - The annual working hours: We assume a 52-week year, 5 days a week, and 8 hours a day for production. - The employee's salary: The employee is paid $75,000 per year. - The direct labor tax rates: The direct labor tax rates are 17% (social security, Medicare, workman's comp, etc.).

Calculating Fully Allocated Cost of a Sheave

To calculate the fully allocated cost of the sheave, we need to consider the following factors: - The unit labor cost of the sheave: We have already calculated this in part b. - The overhead cost: The overhead is calculated as 20% of the direct labor costs.

← The equity method in investment accounting How does an increase in currency to bank deposit ratio affect the monetary base and money multiplier →

More Posts: