Sample Essay

The internal factors that contributed to the changing cost position of the Bridgestone Industries, specifically at the plant pertained to the decreasing demand of theUSmanufactured cars and increased demand for cheaper cars that was reflected un the restricting cost based purchases being made by the big three manufactures form the Bridgestone Industries. As the volume of sales decreased for Bridgestone Industries, along with the margin for profits on sales made due to the rising overhead costs the cost position of the Bridgestone Industries significantly changed to become negative and resulted in the closing of the automotive component and fabrication facility by the Bridgestone Industries.

The Bridgestone Industries had a specific method for determining the overhead burden rate for the products that was proposed and set on an annual basis. “The budgeted unit costs provided by the plant for the 1987 model year study included overhead (burden) applied to products as a percentage of direct labor dollar cost. The overhead percentage was calculated at the budget time and used throughout the model year to allocate overhead to products using a single overhead pool. The overhead rate used in the study was 435% of direct labor cost” (Patricia & Cooper, 1993)

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