How to Calculate Material Cost, Unit Labor Cost, and Fully Allocated Cost of a Sheave
What factors need to be considered in calculating the material cost, unit labor cost, and fully allocated cost of a sheave?
Calculating Material Cost of a Sheave
Calculating Unit Labor Cost of a Sheave
To calculate the unit labor cost of a sheave, we need to consider the following factors:
- The time it takes to produce a sheave: According to the time study, it takes 1 man-hour to produce a sheave.
- The annual working hours: We assume a 52-week year, 5 days a week, and 8 hours a day for production.
- The employee's salary: The employee is paid $75,000 per year.
- The direct labor tax rates: The direct labor tax rates are 17% (social security, Medicare, workman's comp, etc.).
Calculating Fully Allocated Cost of a Sheave
To calculate the fully allocated cost of the sheave, we need to consider the following factors:
- The unit labor cost of the sheave: We have already calculated this in part b.
- The overhead cost: The overhead is calculated as 20% of the direct labor costs.