Let's look at some of the contributions to the product cost for one of Wedgwood's black basalt vases; e 1) Wedgwood's factory makes bulk purchases of the High Fire clay used to produce the vase from a local supplier. The cost is $0.50 per pound. Wedgwood has determined that this vase weighs 1.5 lbs after it has been thrown. In addition, he estimates that 25% of the clay is wasted in slurry during the potter's process. 2) The potter is among Wedgwood's most skilled employees, representing a fully loaded labor cost of $15/hour. To produce this particular design, the potter will spend 5 minutes preparing the clay and 10 minutes "throwing the pot. Wedgwood's experience with this design has shown that about 5% of the thrown vases get broken or ruined before they can sufficiently air dry ahead of loading them into the kiln. 3) The vase is then loaded into the kiln for a Bisque Firing, as per the process described in Part 1. During loading and unloading, some pottery will get broken. In addition, some pieces will crack from the temperature stresses of the firing. Overall, Wedgwood finds that each bisque firing results in about 3% loss. 4) The glazing/painting is applied by trained artists who make (fully loaded) $10/hour. Given the intricate design, it takes 20 minutes to complete this step. Wedgwood is purchasing the glaze at a cost of $60 per gallon and his measurements show that each gallon will last through 100 vases. 5) The glaze firing follows the same process described in Part 1. Wedgwood has found there is less risk of breakage at this step, but a higher chance of finish cracking, resulting in an average loss of about 5%. 6) Final inspect and packaging for shipment takes about 2 mins per vase and is performed by employees making $7 per hour (fully loaded). On average 1% of the final product is found defective and scrapped at this point. 7) Deliveries are made to Wedgwood's various stores, rather than individual customers, allowing bulk shipments to be made at a cost per vase of $0.50. Based on the above, calculate the total direct cost to produce this vase design. Use the attached worksheet. Overseeing the day-to-day operations for each shift is a shift manager who makes $80,000 per year along with an assistant who makes $50,000 per year (both amounts fully loaded). The factory operates with a total of 4, 12 hour shift crews (M-Thu, shifts A & B; plus Fri-Sun, shifts C & D). Other operating costs for the factory average $200K per year. Given the high capital costs of the kilns, Wedgwood has scaled his factory operations to match the capacity limitation of them in order to achieve full equipment utilization. For the sake of keeping things simple, Wedgwood has decided to allocate all indirect costs on a per-unit basis. Assuming the factory is fully utilized, what would be the indirect cost allocation for the above vase? Direct Cost Calcuation Cost/Unit #Units Cost Cum Cost Yield Cum Yielded Cost Process Step Materials - Clay Labor: Prep clay and throw the vase Bisque Firing Materials - Glaze and decoration Labor: Glaze and decoration Glaze Firing Labor. Final Inspect and Pack Shipping cost Total Direct Cost Indirect Costs Indirect labor costs ($/mo) Factory Operational costs ($/mo) Fully utilized factory output (units/mo) Allocation of indirect costs per unit Total Product Cost Let's look at some of the contributions to the product cost for one of Wedgwood's black basalt vases; e 1) Wedgwood's factory makes bulk purchases of the High Fire clay used to produce the vase from a local supplier. The cost is $0.50 per pound. Wedgwood has determined that this vase weighs 1.5 lbs after it has been thrown. In addition, he estimates that 25% of the clay is wasted in slurry during the potter's process. 2) The potter is among Wedgwood's most skilled employees, representing a fully loaded labor cost of $15/hour. To produce this particular design, the potter will spend 5 minutes preparing the clay and 10 minutes "throwing the pot. Wedgwood's experience with this design has shown that about 5% of the thrown vases get broken or ruined before they can sufficiently air dry ahead of loading them into the kiln. 3) The vase is then loaded into the kiln for a Bisque Firing, as per the process described in Part 1. During loading and unloading, some pottery will get broken. In addition, some pieces will crack from the temperature stresses of the firing. Overall, Wedgwood finds that each bisque firing results in about 3% loss. 4) The glazing/painting is applied by trained artists who make (fully loaded) $10/hour. Given the intricate design, it takes 20 minutes to complete this step. Wedgwood is purchasing the glaze at a cost of $60 per gallon and his measurements show that each gallon will last through 100 vases. 5) The glaze firing follows the same process described in Part 1. Wedgwood has found there is less risk of breakage at this step, but a higher chance of finish cracking, resulting in an average loss of about 5%. 6) Final inspect and packaging for shipment takes about 2 mins per vase and is performed by employees making $7 per hour (fully loaded). On average 1% of the final product is found defective and scrapped at this point. 7) Deliveries are made to Wedgwood's various stores, rather than individual customers, allowing bulk shipments to be made at a cost per vase of $0.50. Based on the above, calculate the total direct cost to produce this vase design. Use the attached worksheet. Overseeing the day-to-day operations for each shift is a shift manager who makes $80,000 per year along with an assistant who makes $50,000 per year (both amounts fully loaded). The factory operates with a total of 4, 12 hour shift crews (M-Thu, shifts A & B; plus Fri-Sun, shifts C & D). Other operating costs for the factory average $200K per year. Given the high capital costs of the kilns, Wedgwood has scaled his factory operations to match the capacity limitation of them in order to achieve full equipment utilization. For the sake of keeping things simple, Wedgwood has decided to allocate all indirect costs on a per-unit basis. Assuming the factory is fully utilized, what would be the indirect cost allocation for the above vase? Direct Cost Calcuation Cost/Unit #Units Cost Cum Cost Yield Cum Yielded Cost Process Step Materials - Clay Labor: Prep clay and throw the vase Bisque Firing Materials - Glaze and decoration Labor: Glaze and decoration Glaze Firing Labor. Final Inspect and Pack Shipping cost Total Direct Cost Indirect Costs Indirect labor costs ($/mo) Factory Operational costs ($/mo) Fully utilized factory output (units/mo) Allocation of indirect costs per unit Total Product Cost