Rollie Manufacturing makes, among other things, wheels for roller skates. Manufa

Question

Rollie Manufacturing makes, among other things, wheels for roller skates. Manufacturing Department B receives plastic wheel casings from Manufacturing Department A and puts them on axles along with some ball bearings. The wheel casings have been inspected in Department A and should be free from major defects.

Most of the work in Department B is done by machine, but before the wheels are sent to the Packaging Department, they are inspected for defects. Poorly made wheels are disassembled by hand and sent back to the beginning of the Department B line for rework. Thus any wheel that was made incorrectly and fixed takes more than twice as long to finish as a wheel that was made correctly the first time. Any wheels still not usable after the rework are thrown away.

The same amount of ball bearings is requisitioned from the materials storeroom daily. Any leftover ball bearings at the end of the day are discarded. Ball bearings are measured by weight.

The machines in Department B are serviced only at night after the manufacturing run is over to save on intentional downtime. There are three machines in Department B, so if one does go down during processing, there are still two workable machines until the next day. Rollie's goal in Department B is to produce 400 usable wheels per day.

Under what circumstance would you consider ball bearings indirect rather than direct materials? Would you consider them direct materials or overhead in this problem?

What non-financial measures can Rollie use in Department B to control overhead costs?

Suggest some ways Rollie can better plan for and reduce overhead costs, given your answer to requirement 2.

Explanation / Answer

1. Under what circumstance would you consider ball bearings indirect rather than direct materials? Would you consider them direct materials or overhead in this problem?

With the ball bearings being requisitioned in the store room daily and at the end of the day it would be considered indirect materials and since there is not an exact count of bearings it would be considered overhead in this situation. Direct materials are materials purchased and used to make the product. So, even though they are being requisitioned in the store room daily, I think the ball bearings should be direct materials because they are used to produce the roller skating wheels. In this case they are throwing away what is left at the end of each day, so they do not seem to be keeping inventory on the ball bearings.

2. What non-financial measures can Rollie use in Department B to control overhead costs?

To control the overhead costs Rollie can investigate as to why they’re having so many wheels being produced that can’t be used. The problem could be due to mechanical errors or the weight of the ball bearings. Whatever the case may be the problem can be alleviated to cut back on overhead costs. Rollie can also check to see if the employees in Department A are using the proper steps to make the wheels being that most of Department B’s is done by machine.

3. Suggest some ways Rollie can better plan for and reduce overhead costs, given your answer to requirement 2.

At the beginning of each shift they should make sure they have all the materials needed to make the wheels and check the ball bearings to make sure they aren’t defected in any way. Rollie should also have maintenance done on the machines on a regular basis to make sure they’re operating properly. Also instead of discarding the bearings that aren’t used they should keep them so they can use them when needed so they won’t have to buy them as often. Throwing away bearings on a daily basis actually makes the overhead costs go up so that’s something Rollie should definitely change on their part.

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