Essay: Overhead Costs of Bridgestone Industries

Sample Essay

The analysis of the overhead burden that was determined for the years, 1987, 1988, 1989 and 1990 showed that the total over heads increased from 1987 to 1988. However in 1989, there was a drop in the overhead level as the muffler exhausts and the oil pan based product lines were merged with the other three product lines. This reduced the overheads significantly. In 1990 however the trend shows that the overheads for the Bridgestone Industries increased again on an annual basis. The direct labor dollar cost showed a similar trend as well reflecting the increasing expenses along with the effect that the closure of the muffler/exhaust and oil pan lines had on the labor cost. The overhead burden rate that was determined pertained to approximately 437 percent in 1987, 434 percent in 1988, 577 percent in 1989 and 562 percent in 1990.

The overheads shared by the respective product lines also depicted significant change in the years from 1987 to 1990. On average the oil pans product line had the largest overheads allocated to its while the product line for the front and rear doors had the lowest overhead levels for the years 1987 and 1988. When the product lines were merged in 1989, the manifolds product line had the largest level of overheads allocated to it, while the product line for front and rear doors had the lowest level of overheads assigned to it. On a year to year basis, the overhead burden level has decreased by a small gradual percentage over the four years highlighted. This is not due to the fact that the overheads for the company have been decreasing; instead this has occurred due to the fact that the dollar cost of the direct labor has incrementally increased over the four year period as well resulting in the decrease in the overhead burden rate.

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