Crate a Work Breakdown Structure $($WBS$)$ sheet using the project information provided. It includes a place for both direct and indirect costs for the following items:

Labor.

Manufacturing.

Research and Development.

General Administrative.

Analysis of Direct Material and Other Direct Costs

Participants:

Sally$-$ Intern

Dominic$-$ CEO of SolarCal

Luke$-$ Head of Productions

Jake$-$ Head of Accounting$/$Finance

Melissa$-$ Head of Government Contracting

Dominic: Hello again Sally! How did everything work out last week during your time with Luke?

Sally: Hi Dominic! It was another productive week with Luke; he really emphasized the importance of examining labor costs and showed me several methods his department utilizes when working with these costs.

Dominic: Luke is quite right; those concepts are very important and something we put due diligence in during our analyses. It sounds like you and Luke had quite the learning experience last week $($laughter$)$ I$\text{'}$m glad to hear you learned a lot and gained valuable experience working in his department.

Jake has been requesting some extra assistance this week, so I will have you working with him this week. He told me he was working on something special and that his project would be something that would interest you. Please be sure to pay attention to what Jake goes over with you this week.

Sally: I will definitely pay attention to what he goes over, as I$\text{'}$m sure it will be very useful for future projects I may be assigned. I$\text{'}$m really excited to get started and see what he is working on$!$

Dominic: I$\text{'}$m glad to hear that, let's now make our way down to Jake's office now.

Dominic: Good morning Jake! I have brought Sally down at your request for some extra help on the project you were telling me about.

Jake: That is right! I am working on this project that deals with analyzing material costs for a company.

Dominic: That is fantastic! I told Sally to pay very close attention to what you go over; as it may be helpful for future projects I may assign her.

Jake: I will be sure to give her a lot of information to prepare her for possible future endeavors. This project is very important and I$\text{'}$m sure it will serve as a great learning experience for Sally!

Dominic: That would be great! Thanks again Jake and good luck this week Sally!

I can't wait to hear about the project when I see you next. Take care!

Sally: See you later Dominic and I will be sure to provide you with an update of what I learned this week.

Jake: Welcome back Sally! As Dominic told you, I am working on a special project involving material costs. This project was a little more than I could handle, and this is where you come in$.$ You will be assisting me with this project and seeing it through. However, before we can work on this project let me get you up to speed with some key concepts that will assist you.

Sally: That sounds great, and I think that will really help me$.$ Before we get started could you tell me more about direct material costs? I recall that I have heard this term before but am not sure if it goes with what we will be discussing.

Jake: This term direct material costs, has a lot to do with what I will be sharing with you. Keep in mind that a direct material cost is the cost of significant materials that are used in the manufacturing of a product or that are used up in providing a service. For the project we will be working on$,$ the direct material costs will be specifically identifiable to the contract issued.

The direct material costs we will be using would include items the buyer expects to buy, specifically for the contract and the inventory on hand to be consumed when performing the contract. Several companies, however, do not attempt to charge for every item, no matter how small in cost$,$ to a specific contract or job. Many companies feel that by charging for every item, this becomes too much trouble and leads to administrative costs that exceed the value gained by charging for these items.

Sally: That makes a lot of sense and I can see now why direct material costs are so important. I do have a question though, are there any Federal Regulations for how we track this information?

Jake: That is an excellent question! Federal Regulations contain the instructions for submitting a contract$-$pricing proposal. These instructions will then elaborate on the general instruction by adding instructions for various material categories. Some of these material categories include the following:

Subcontracted items;

Standard commercial items;

Inter$-$organizational transfers;

Inter$-$organizational transfer at cost;

Raw materials; and

Purchased parts.

There is also an analysis of proposed estimated materials costs that is run. This analysis of estimated costs for materials is done essentially the same way as for estimated direct labor costs.

Sally: It seems that the tracking can be quite involving but I$\text{'}$m