What are the key considerations in calculating the cost of producing a sheave for pumps?
Material Cost of a Sheave
One key consideration in calculating the cost of producing a sheave for pumps is the material cost. This includes the cost of the bar stock steel, the amount of steel lost in the manufacturing process, and the scrap value of steel.
a) Material Cost Calculation:
To calculate the material cost of a sheave, we need to consider the following factors:
- The bar stock is purchased in 4-foot lengths with a diameter of 6 inches.
- The bar stock steel costs $3.00/lb and has a density of 493lb/ft^3.
- 1 length of stock can produce 20 sheaves.
- 5% of the steel is lost in the manufacturing process.
- 1 out of 10 sheaves needs to be scrapped due to poor quality.
- The scrap value of steel is $0.40/lb.
To calculate the material cost of a sheave:
1. Calculate the weight of steel required for one sheave.
2. Calculate the material cost of one sheave by considering the cost of bar stock steel and scrap value.
b) Unit Labor Cost of a Sheave:
Another key consideration is the unit labor cost of producing a sheave. This involves calculating the cost of labor required to manufacture a sheave.
To calculate the unit labor cost of a sheave:
- 1 man-hour is required to produce a sheave.
- An employee is paid $75,000 per year.
- Direct labor tax rates of 17% are applied.
Calculate the unit labor cost of a sheave based on the employee's annual salary and the time required to produce a sheave.
c) Fully Allocated Cost of a Sheave:
The fully allocated cost of a sheave takes into account overhead costs, which are a percentage of direct labor costs. This provides a comprehensive view of the total cost of producing a sheave for pumps.
To calculate the fully allocated cost of a sheave:
- Overhead is calculated as 20% of direct labor costs.
- Combine the material cost, unit labor cost, and overhead cost to determine the total cost of producing a sheave.
In conclusion, by considering the material cost, unit labor cost, and fully allocated cost, a company can accurately calculate the cost of producing sheaves for pumps.