Question

Manufacturing Costs: Pick a product and identify four direct materials that are used to create the product, identify at least two types of labor, Identify at least three types of overhead costs, and discuss how the company should be able to do to lower each cost.

Answer 1

Let's take the product as 'car'.

Four direct materials are as follows:

1. Steel 2. Aluminium 3. Glass 4. Copper

Two types of labor:

1. Unskilled labour: This type of labour is required at the plant in the assembly line.

2. Skilled labour: Engineers are reuired at the production site for the specific work like measurements, management of people.

Three types of overhead costs

1. Advertising 2. Factory rent 3. Utilities

How to lower the costs?
1. Direct material costs can be reduced by entering into a long-term contract to avail the benefit of economies of scale.

2. Labour costs can be reduced by improving the labour's efficiency by hiring efficient employees, using production softwares etc.

3. Overhead costs can be reduced by setting the budgets for each of the overheads and regularly checking the products to avoid repair expenses.