Sample Essay
The Bridgeton Industries underwent significant changes and evolution in its cost positions. The company first wrote off the physical machinery, the equipment and the buildings from the automotive component and fabrication plant’s financial books to reduce the costs associated with the depreciation expenses for these items. Then the company employed the costing strategy for its product lines that was based on the three elements of materials, direct labor, and overheads.
The research undertaken to determine the high levels of costs at the Bridgeton Industries and the factors contributing to these costs provided that the overhead burden was one of the main factors that was forcing the automotive component and fabrication plant to be least cost effective when it came to generating profit. The results provided that the overhead burden existed on a ratio of 435 percent of the direct labor cost (Patricia & Cooper, 1993). This was a significant percentage of the total costs being attributed as an expense for overheads which was forcing Bridgestone Industries into a negative cost position with its customers.
The cost position evolution saw that the Bridgestone Industries were gradually facing increasing costs in the form of incremental overhead expenses, increasing spend on the manufacture and processing of the product lines as well as the costs associated with the management and the operation of the automotive component and fabrication plant. This decreased the appeal of the products being produced at high costs for the customers of the Bridgestone Industries which forced the Bridgestone Industries to reduce shut down the automotive component and fabrication plant as it was continuously depicting increasing costs that reduced the profit margins for the Bridgestone Industries on the products that its sold to the big three automobile manufactures in the Unites States automobile industry.
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