MAE486_Fall11_L24_S

MAE486_Fall11_L24_S - MAE 486 Design of Mechanical Systems...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: MAE 486 Design of Mechanical Systems Lecture 24 Fall 2011 Today s topics: Cost evaluation (Chapter 16); Overhead Costs •  What does an overhead cost included? –  Any cost not specifically or directly associated with the produc;on of iden;fiable goods or services. •  How to es;mated? –  A variety of ways. •  What are the main categories? –  Factory overhead •  The cost of manufacturing that are not related to a par;cular product –  Corporate overhead •  The costs of running the company that are outside the manufacturing or produc;on ac;vi;es. Overhead Costs (cont’d) •  How is it defined? –  Overhead rate=OH=Overhead charges/Basis •  Are the OH rates the same for different plant? –  No. Different OH Rates  Different plants. Management decision. Why? •  How is it determined? What are the basses? –  Direct labor dollars or hours. –  What are other bases? •  Machine hours, materials cost, number of employees, and floor space. Example: Overhead Costs A modest ­sized company operates three plants with direct labor and factory overhead as follows. •  If in addi;on, the cost of management, engineering, sales, accoun;ng, etc. is $1.9 Million. Find the corporate overhead rate based on the direct labor. •  Corporate OH= Example: Overhead Costs A batch of 100 parts requires 0.75 h of direct labor each in the gear ­cu\ng opera;on. If the cost of direct labor is $20 per h and the factory overhead is 160%, determine the total cost of processing a batch. •  The cost of processing a batch: The factory overhead charge: The total cost:  The unit cost is More on Overhead Costs •  For a par;cular cost center or remanufacturing process: The overhead rate is dollars per direct labor hour ($/DLH). It is calculated by total overhead charges/total labor hours. •  The alloca;on of overhead on the basis of DLH could cause confusion as to the real cost when process improvement results in an increase in manufacturing produc;vity. •  The alloca;on of overhead can also be based on direct material costs; Example: Overhead by DLH A change from a high ­speed steel ­cu\ng tool to a new coated WC tool results in halving the ;me for a machining opera;on because the new carbide tool can cut at a much faster speed without “losing its edge”. The data for the old tool and the new tool are shown in the following table. •  Actual saving •  Lesson: More on Overhead Costs •  In many manufacturing situa;ons, overhead alloca;on based on something other than DLH may be appropriate. For example, consider a plant whose major cost centers are a machine shop, a paint line, and an assembly department. Review for Final ­Exam •  What are the main topics we have discussed aeer mid ­term? Review for Final ­Exam •  Modeling •  Design for manufacturing Review for Final ­Exam •  Robust design •  Cost evalua;on ...
View Full Document

This note was uploaded on 02/26/2012 for the course 650 486 taught by Professor Zou during the Fall '11 term at Rutgers.

Ask a homework question - tutors are online