Indirect costs depreciation

The manufacturing cost consists of direct, indirect, distribution, and fixed costs. Direct costs are raw materials, operating labor, production supervision, utihties, suppHes, repair, and maintenance. Typical indirect costs include payroll overhead, quaHty control, storage, royalties, and plant overhead, eg, safety, protection, personnel, services, yard, waste, environmental control, and other plant categories. However, environmental control costs are frequendy set up as a separate account and calculated direcdy. The principal distribution costs are packaging and shipping. Fixed costs, which are insensitive to production level, include depreciation, property taxes, rents, insurance, and, in some cases, interest expense. 

All rocket motor costs per unit, and therefore rocket proplnt costs, are most sensitive to the number of units being produced and to the number of different formulations mixed in a given time interval, by the same equipment, so that a direct comparson based only on processes or proplnt types are meaningless. There are also inherent difficulties in comparing NC base proplnts with composite propints. The former are made in government plants (some of which are operated by private industry) for the most part and so accounting for indirect costs (taxes, depreciation, insurance, and return on investment) cannot be compared to the situation... 

Fm// costing. This form of costing takes all expenses into account, including direct costs such as raw materials, and also indirect costs—such as head office expenses, insurance costs, design fees, contingency provisions, services, maintenance and depreciation. 

The total manufacturing expenses are the sum of direct costs, indirect costs, general expenses, and depreciation. 

Total depreciable investment = total direct cost + total indirect cost... 

The total direct cost (TDC) includes both the direct installation costs and the costs of site preparation and buildings. Further, the sum of the total direct cost and total indirect cost (or direct installation costs) is termed the battery limits cost. Finally, the battery limits cost plus the cost of off-site facilities (e.g., a railroad spur) comprise the total depreciable investment. Put simply, this is the portion of the TCI for which the firm is permitted to take a depreciation deduction on its corporate income tax return. The other portion of the TCI, namely, land and working capital, may not be depreciated. Hence, this portion is called the total nondepreciable investment. 

Figure 2.4 divides the depreciable capital costs into several categories. The two major categories are direct and indirect costs. Peters and Timmerhaus [4] and Humphreys [5] list these costs. Reference [3] gives a more detailed breakdown. As Figure 2.4 shows,... 

Notes All cash flows are discounted at 10%, IS-yr project life. Capital spending for all projects is assumed to begin in 1991. O M = operation and maintenance costs, depreciation, indirect costs, taxes, and insurance. 

Corrosion, the degradation of a material s properties or mass over time because of environmental effects, is a costly reality that effects every industry. A study issued by the Federal Highway Administration (FHWA) in 2002 conservatively estimates the annual direct cost of corrosion in all U.S. industry sectors at US 276 billion. Costs associated with corrosion include cathodic/anodic protection coatings inhibitors corrosion-resistant alloys and materials and maintenance, repair, and depreciation of equipment. Indirect costs, such as lost productivity, environmental or product contamination, planning and design, and lost opportunities, can easily outpace direct costs by factors of two or more. 

As 1n any economic study certain assumptions must be made. It 1s not the Intent of this paper to analyze cost factors 1n fine detail, but rather to examine and compare the major direct cost contributors 1n molding large plastic parts by these major process techniques. These direct cost factors are productivity, raw materials, process energy, tooling, flxturlng, hourly labor and capital. Indirect costs that are based on these direct cost Items are not considered 1n this study. Such Indirect Items Include supervision, maintenance, general plant overhead, Insurance, taxes and building depreciation. 

The reported expenditures don t correspond exactly to cash outlays because charges for indirect costs, overhead, or capital equipment and facilities may be made using allocation or depreciation methods that don t correspond in time to actual cash outlays. The term cash costs is used here to differentiate the reported expenditures from their present values in the year of market approval. 

While typical components of direct costs are direct material and direct labor (case 3), maintenance together with insurance, taxes, and depreciation are usually considered indirect costs (A. Mitra et al. 1993). In order to integrate maintenance service with other information systems, as for instance could be information about warranty, there are also computerized management systems which provide efficient methods of integration, and support all maintenance activity (Da Silva el al. 2008). In spite of this, there are issues (but is not limited to) not covered by warranty or maintenance ... 

Shop Overhead. In addithm to the direct costs involved for materials and labor, idl fabricators must add an indinvt cost often termed the shop overhead or burden. This overhead includes a variety of items, such as the cost of supervision, administration, engineering, sales, utilities, maintenance, depreciation, taxes, and other fixed and indirect costs. These cc ts vary from shop to shop, area to area, and year to year, and are estahlMted hy the ctmrfitions for a particular shop and hy Ifie acA ouiiting pnictice followed. I his overhead usually rang ftxmi 100% to 200% of the total cowit for labor and materials. 

An alternative to allocating overheads by using a single method is to classify the various overheads into groups and to use the most appropriate allocation for each group. For example, depreciation would be allocated on the basis of capital cost, while indirect labor might be allocated either on the basis of direct labor cost or on the number of employees. Clearly, this alternative method is more complex, increases the associated accountancy costs, and is prone to misinterpretation and possibly abuse. 

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