MAE486_Fall11_L24_S - MAE 486 Design of Mechanical Systems...

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

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