Whitbread World Sailboat Race

The current cost system allocates overhead costs once a year, as a function of direct labor dollars. This allocation strategy results in:

Shaving 5% off the estimated direct labor-hours in the predetermined overhead rate will result in an artificially high overhead rate. The artificially high predetermined overhead rate is likely to result in overapplied overhead for the year. The cumulative effect of overapplying the overhead throughout the year is all recognized in December when the balance in the Manufacturing Overhead account is closed out to Cost of Goods Sold. If the balance were closed out every month or every quarter, this effect would be

6. Other manufacturing overhead consisted of indirect materials $14,000, indirect labor $20,000, and depreciation on factory machinery $8,000.

Direct labor assembly costs are, by their nature, directly traceable to individual products. Therefore the relevant cost driver for this cost is the number of Direct Assembly Labor Hours. The other 21 cost categories are indirect costs.

As defined by the OMB (2004), “Indirect costs are those incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved” (p. 11). The costs in question include international conference, employee recreational activities and counseling services, investment counsel, lobbying, depreciation, and insurance. Despite seemingly

When considering factors that didn’t go well as far as schedule the project took a steep hit. While the initial item started on time, it ended two days later than was initially planned. This meant that “Set product Specs” was 2 days late starting. With this project each line item has a predecessor. This means that they cannot start until the previous item is finished. With this every portion of the project was late starting and threw the entire project off. With regards to the cost “Need Survey” was over budgeted by $6,400 and “Set product spec” was over budgeted by $11,520.

Overhead costs include rent, office staff, depreciation, and other. Once the flexible budget was complete, variances between the actual and flexible budget could be calculated (Exhibit B). The variance for frame assembly was favorable with actual costs being $82,663 less than in the flexible budget. The variances for wheel and final assembly however were both unfavorable. Wheel assembly had an unfavorable variance of $50,650, while final assembly variance was the highest at an unfavorable variance of $231,200. Taking into account these three aspects of direct cost, direct cost has an unfavorable variance $199,187. Although most overhead costs are fixed, 2/3 of other costs are variable and increase with the increased production. As shown in Exhibit B, overhead variance is unfavorable at $60,000. The direct cost variance and overhead variable together lead to a total unfavorable variance of $259,187.

3. Under the new activity-based costing (ABC) system, compute the indirect cost allocation rates for each of the three activities:

unit, two types of costs are distinguished. Firstly the direct costs, consisting of the direct

Boats come in many different shapes and sizes. Though they can be fun toys, there is a lot that to consider when diving into the physics behind it. There many factors that need to be taken into consideration when building a boat, a few of the important ones are weight, rudders, the position of a rudder and the position in which a motor is placed. Each of these factors are what either make or break a boat.

The following paper analyzes the Whitbread World Sailboat Race case scenario presented at the end of chapter 9 in the Gray and Larson text, Project Management: the Managerial Process. The project encompasses two main objectives; one, design, build and test a new vessel, and two, select and train a crew capable of winning the race. Both objectives must be completed within 45 weeks, the start of the race, and with a planned budget of $3.2 million.

Analyzing crash times and costs we see that if each activity were crashed the project could be finished in 42 weeks, however, the budget would skyrocket to $4.952 million. Therefore, the team will need to analyze the project network and its critical path to determine which individual activities can be crashed while maintaining the integrity of the budget and the duration of the project.

With clear expectations of which activities take precedence, the Bjorn project team can then analyze the various events to determine which can be crashed and the additional costs associated with doing so. This analysis should be done prior to finalizing the project network because not all events will be crashed in order to keep costs to a minimum.

A direct cost can be traced to a product or service which includes: Direct labor- which is the cost of the labor that’s directly connected to a product or services. Direct labor is sometimes called touch labor, since direct labor workers typically touch the product while it is being made.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 39-40) An example of direct labor is an assembly line worker. Labor cost that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience, are considered to be indirect labot.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 40) Direct material are those materials that become an integral part of the finished product and whose cost can be traced to the finished product.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p39-40) Manufacturing overhead is the third element so manufacturing cost, it includes all costs of manufacturing except direct materials and direct labor. Manufacturing overhead includes items such as indirect materials; indirect labor; maintenance and repairs on production equipment; and heat and light, property taxes, depreciation, and insurance on manufacturing facilities. Only cost associated with operating the factory are consider to be manufacturing overhead cost. A company also incurs other costs associated with its selling administive functions, but these costs are not included as part of manufacturing overhead. Only those

Direct costs are costs directly related to producing the products and services of a project. On the other hand, indirect costs are costs not directly related to a project’s products or services, but are indirectly related to performing the project.