Product costs
Product costs are referred to as the costs used in inventing a product. The organization of David Baker has high production costs that need to be reduced to increase the profit margins. The following are recommendations of how product costs can be reduced by the T-shirt manufacturing company of David Baker.
Improving the technology in the organization
Invention and innovation of technology will play a significant role in cutting down the production costs of organizations (Kuznetsova, 2017). Improvement of the technology used in the manufacturing of T-shirts in David Baker will play an important role in cutting the product costs. Technology increases the pace or speed of products are manufactured. Improvising of the technology used in the production of T-shirts will play an essential role in the manufacture of T-shirts. The product cost used in the manufacturing of T-shirts will reduce significantly. The batch produced by the technology used by David Baker will increase drastically. The valuable time used in the production of the T-shirts will dramatically decrease.
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Listening to the people involved in the line
Management allowing junior employees to play a significant role in decision-making has led to most organization formulating strategies that can reduce the production costs of an organization. David Barker would ensure reduction of production costs by creating a platform on which the employees can air their views on how production can be improved to reduce the production costs. A decrease in product costs will increase profit margins of David Baker company.
Direct materials costs
Direct material costs are costs which a company or an organization incurs when acquiring raw materials that are consumed in the process of manufacturing a product. However, direct material costs can be reduced by an organization significantly through the following recommendations.
Reduction of wastage by David Baker company
Wastage has been an attributing factor in increasing the costs of direct material. Wastage of raw material by the company is primarily attributed to the production methods used by the company (Kuznetsova, 2017). Production methods and raw materials of the right quality are the primary determinants in determining the cost of direct material costs. However, David T company may deploy new techniques in the manufacturing department to help cut down the costs of direct material labor. For instance, when David T acquires clothing texture of low quality at about $ 40000 and ten percent goes down as waste, David T will have to purchase more texture material to cover up for the cost of direct material wasted in the production process of T-shirts.
The organization has reliable suppliers
In the business world, it’s always important to survey your potential suppliers. David T company can help reduce the costs of direct material by sourcing for a supplier who will provide the company with quality raw materials and at a reasonable price. David Baker would have reduced the costs of direct materials significantly.
Direct Labor cost
Direct labor costs are the cost which is incurred directly in production. However, direct labor costs can be reduced in David Baker company through the following ways.
Utilizing part-time laborers by David Baker
Full-time laborers are required to be paid by the David Baker company their salaries that come with various benefits (Mueller, 2018). However, David Baker company can reduce the cost of direct labor involved in manufacturing by putting to use part-time workers. The part-time worker is not mandated to be paid benefits thus having an advantage in David Baker company as the direct labor cost decrease.
Lean production
Lean production will eliminate the processes that do not add value to the manufacturing process of the company (Mueller, 2018). Implementation of lean manufacturing by David Baker will reduce the duplication of roles by employees thus cutting down on the labor costs.
Manufacturing overhead costs
Overhead costs are the indirect used in the manufacturing of the end of a material such as advertising expenses and marketing expenses. However, it is essential for these overhead costs to be reduced by David Baker company. Reduction of overhead costs can be made through the following ways.
Implementing proper planning and budgeting strategies
David Baker can reduce the overhead costs by creating a better planning strategy that will do away with unnecessary expenses. Budgets enable allocation of resources in each department of David Baker thus ensuring the funds will not be wasted.
Employment of employees who can multitask
David Baker company can cut down the cost of overheads in his firm by employing employees who can conduct more than one task.
References
Kuznetsova, S., & Tykhanska, I. (2017). Development of Accounting and Analytical Provision of Cost Calculation for the Stages of the Product Life Cycle. Accounting and Finance, (3), 38-45.
Mueller, D. (2018). The Usability and Suitability of Allocation Schemes for Corporate Cost Accounting. In Game Theory in Management Accounting (pp. 401-427). Springer, Cham.
