Sample Essay

It has also been assumed that by outsourcing the manifold production line, the company is able to eliminate the costs associated with manifold production line labor, the direct materials used by the manifold production line and the overheads that were contributed to by the manifold production online. Another assumption that is made in the proposed budget is that even though the company has outsourced its operations for the manifold production line.

The company is still selling the products by purchasing them from the outsourcing company and providing them to the automobile manufacturers in theUnited States. As a result the sales revenue is forecasted even though the costs associated are eliminated and not considered. Moreover the costs associated with outsourcing are not incorporated in the budget as they are no longer part of the manufacturing/ productions department.

The proposed budget that has been drawn up significantly depicts that if the company opts to outsource the manifolds production line in the year 1991, then the company is able to observe significance reductions in its operating costs and overheads. Therefore it can be mentioned that by outsourcing the manifold production line the company can experience cost savings and better revenue levels

The proposed budget for the year 1991 indicates that the Sales forecast increased to $237 million while the direct material based costs are forecasted to be at $35 million. The forecast of the direct labor employed for the active production lines would be at $7 million only while the total overheads for the operation would be equivalent to 2 million only. The overhead burden rate in the year 1991 as a result is reduced to 307 percent with the allocated overhead for the fuel tank’s production line at $26 million while the production line for manufacturing the rear and front doors would be at approximately $17 million.

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