Factory Tour Assignment Essay

Direct costs are those costs that can be directly attributed to a product, while indirect costs are those costs that cannot be directly attributed to one unit of the product. This paper reports some of the direct and indirect costs experienced by Trek bicycle factory in Waterloo, WI, Canada.
There are two types of direct costs - direct material costs and direct labor costs. Direct material costs are the raw materials that go into the manufacturing process. In bicycle manufacturing, the direct material costs are the steel and aluminum steel tubes that are then cut with a precision blade to weld together to create the frame of the bicycle. The direct labor costs in this bicycle factory are the people that weld the steel tubes together, as they are directly involved in the manufacturing of the product.
There are also indirect costs that the bicycle factory incurs. There are two types of indirect costs – indirect material costs and indirect labor costs. The indirect material costs that the factory incurs are the bath tubs of chemicals and neutralizers each frame is dipped into to prevent corrosion and improve paint adhesiveness. These are indirect material costs as we can’t really know for sure as to how much chemical does each frame use. Some may take more than others. The indirect labor costs in the bicycle factory are the people security guards of the factory, and the inspection supervisors. These people are not directly involved in the manufacturing of the product.
Lastly, there are overhead costs which are necessary costs but cannot be directly traced to one unit of the product. The bicycle factory experiences overhead costs like electricity, insurance of the factory, rent of the factory, etc.