Bridgeton Industries: Automotive Component & Fabrication Plan
Bridgeton Industries:
Automotive Component & Fabrication Plant
The Automotive Component and Fabrication Plant (ACF) was the original plant site for Bridgeton Industries, a major supplier of components for the domestic automotive industry. It manufactured fuel tanks, manifolds, doors, muffler/exhausts and oil pans. All its products were sold to Big Three domestic automobile manufactures. Competition was from local suppliers and other Bridgeton plants. The plant well grew and developed as far as the market dominated by U.S automobile manufactures. It became less effective when foreign competition and scarce, expensive gasoline caused domestic loss of market share. Throughout the 1980s, the ACF experienced serious cutbacks due to this competitive pressure. The critical issues of drop off one or more products made ACF have to seriously analyze all the cost effectiveness of each product. Step by step, all the issues will be considered before the final recommendation is made.
(Question 1) First, we go back to the year 1987, two years before the two products of Mufflers/Exhausts and Oil Pans were dropped. The overhead allocation rate of 435% to the direct labor was applied to each product. We allocated the OH of fuel tanks, manifolds, doors, Muffler/exhausts and oil pans were $18,135; $25,604; $11,401; $24,512 and $27,714. It made the total of OH $107,367 (see table 1). These numbers were only the estimated numbers for the estimated budget year 1987 and that is why it was slightly different from the real OH raising through the real activities (see exhibit 2) of $107,954.
(Question 2) Similarity, we can easily calculate the overhead allocation rate to labor cost for the year 1987, 1988, 1989 and 1990. Comparatively, they will be 437%, 434%, 577% and 563% (See table 2a). It was very clear that 1988 was not significantly changed but the year 1989 and 1990 were dramatically changed in comparation with the year 1987 because in these 2 years, two products of
Automotive Component & Fabrication Plant
The Automotive Component and Fabrication Plant (ACF) was the original plant site for Bridgeton Industries, a major supplier of components for the domestic automotive industry. It manufactured fuel tanks, manifolds, doors, muffler/exhausts and oil pans. All its products were sold to Big Three domestic automobile manufactures. Competition was from local suppliers and other Bridgeton plants. The plant well grew and developed as far as the market dominated by U.S automobile manufactures. It became less effective when foreign competition and scarce, expensive gasoline caused domestic loss of market share. Throughout the 1980s, the ACF experienced serious cutbacks due to this competitive pressure. The critical issues of drop off one or more products made ACF have to seriously analyze all the cost effectiveness of each product. Step by step, all the issues will be considered before the final recommendation is made.
(Question 1) First, we go back to the year 1987, two years before the two products of Mufflers/Exhausts and Oil Pans were dropped. The overhead allocation rate of 435% to the direct labor was applied to each product. We allocated the OH of fuel tanks, manifolds, doors, Muffler/exhausts and oil pans were $18,135; $25,604; $11,401; $24,512 and $27,714. It made the total of OH $107,367 (see table 1). These numbers were only the estimated numbers for the estimated budget year 1987 and that is why it was slightly different from the real OH raising through the real activities (see exhibit 2) of $107,954.
(Question 2) Similarity, we can easily calculate the overhead allocation rate to labor cost for the year 1987, 1988, 1989 and 1990. Comparatively, they will be 437%, 434%, 577% and 563% (See table 2a). It was very clear that 1988 was not significantly changed but the year 1989 and 1990 were dramatically changed in comparation with the year 1987 because in these 2 years, two products of