* With
labor and overhead costs lower, they will likely justify sourcing from China, but there are a myriad of logistical and cultural issues to navigate.
Costs: Material,
labor and overhead costs as a percent of sales; inventory turnover; selling, general and administrative costs; interest cost as a percent of sales; and effective tax rate.
The combination of abrasive costs and
labor and overhead costs per piece will equal total grinding cost per piece.
Accounting textbooks include these expenditures as inventory: the cost of manufacturing--raw materials,
labor and overhead, such as indirect materials and indirect labor, and the cost of purchasing--purchase price, freight and other costs that are directly related to bringing goods to the purchaser and converting them to salable condition.
Under this method, the LIFO index is computed on the basis of the price changes in the individual elements of the product (i.e., raw materials, labor and overhead).
The key issue is whether, under the dollar-value LIFO method, the term "item" must be defined only in terms of an identifiable physical product, or whether it may be defined with reference to the elements that make up the physical product, such as material, labor and overhead.
Materials,
labor and overhead costs (broken out by product, part, service, work center and operation) all can be monitored.
To understand a standard cost system that integrates overproduction variances into the system, consider EXHIBIT 1 Production variances for
labor and overhead. The company has scheduled production of 1,000 units.