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Category > Management Posted 29 May 2017 My Price 8.00

“Should Cost” of an Extruded Plastic Part

“Should Cost” of an Extruded Plastic Part John Marshall’s supplier has quoted $1,100.00 per 1,000 pieces for a plastic molded
part. Marshall wants to determine if this price is reasonable. The annual usage is
1,000,000 per year and the supplier is sole source.
Marshall decides it will be necessary to develop a “should cost” for the part. Working
with his engineering and production departments, they estimate that the direct material
cost should be $98.90 and the direct labor cost should be $241.00 for the 1,000 pieces
requested in this quote.
From a review of annual report studies Marshall found that similar extrusion companies
of the same size doing similar work have the following average ratios:
The Material Overhead rate =10% of Material Cost
The Indirect Factory Overhead rate =118% of Direct Labor Cost
The Sales, General & Admin. (SG&A) Expense rate =13%
Profit =10%

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SuperTutor
(15)
Status NEW Posted 29 May 2017 02:05 AM My Price 8.00

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