Essay Bridgstone Industries
The ACF plant has experienced serious cutbacks throughout the 80s due to competitive pressure caused primarily by the entrance of foreign competition in a market formerly dominated by US auto manufacturers and the oil shock of the 70s. The expensive gasoline has started a trend in the auto industry for fuel efficiency resulting in ever increasing emission standards.
With the resulting loss of domestic market share, ACF is facing intense competition from not only other suppliers but other Bridgeton plants as well. The task of remaining cost competitive is daunting as outsourcing seems to be catching on as a way to cut costs.
Overhead Burden Rate
We have used direct labor as the …show more content…
Fixed costs are defined as costs that do not change with the level of business activity. By this we mean those costs that still have to be incurred regardless of whether 1000 or 10000 manifolds are produced. This does not mean those costs that will continue to be incurred if we shut down production for manifolds and outsource.
This is an important distinction for our classification given below:
1500, 5000, 8000, 9000, 11000, 14000
Note: All costs are variable in the long run
We have taken avoidable costs to mean those costs that can be avoided if a certain action is undertaken. In our case that action is the outsourcing of Manifolds.
Except for 8000 and 11000 all other costs are avoidable to an extent because they are related to a certain minimum level of the production activity. (Even 8000 is avoidable given a