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Controlling Overhead
A large portion of manufacturing costs are overhead costs. One of the key
jobs of manufacturing management is to keep these costs as low as possible.
e dumbest way to measure overhead costs is to benchmark them against
competitors or companies in similar businesses. e second dumbest way
to measure them is to show them as a ratio of direct versus indirect labor.
Here are the reasons why these comparisons are meaningless.
Dierent companies consider overhead dierently. In some companies,
quality inspectors and lead- girls are considered overhead, whereas in oth-
ers they are considered direct labor. Some companies outsource ...