Cost component of ship repair

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Ship repair component
Ship repair component

In the process of repairs in the dock and shipyard companies generally there are 3 (three) basic cost components, namely:

1. Direct Material Costs ( direct materials ).
2. Labor Costs ( direct labor ).
3. Indirect costs ( overhead ).

Of the cost components, the first two basic components, namely direct material costs (direct materials) and direct labor costs (direct labor) the amount is a direct cost, while the sum of direct costs with indirect costs is the cost of production. If this production cost plus operating loss / profit is the sale of production results.

1. Direct Materials Costs (Direct Materials)

Direct material costs are material costs or materials directly used in the production / repair process to realize a product that is ready to be handed over to the ship owner / consumer. For the repair process in the dock and shipyard companies, the material can be directly divided into:

  • Main Material.
    It is the raw material needed to realize production results, including steel plate / profile, shaft material, wood, paint for rust protection and color paint, main motorbike, machining, valve valves, pipes, navigation equipment, life safety equipment at sea.
  • Supporting material.
    Is the material needed to process the basic material to realize a production result, including: welding electrodes, oxygen gas, liquid acetylin, carbide, liquid LPG, paint / lime for the handling.

In practice there is a direct residual material that can sometimes still be used as a direct material from a Jain production in the shipyard company environment, for example wood residue from shipbuilding construction work will be a direct material for making pegs or other reinforcement, sometimes residual material directly which cannot be used as direct material for other workshops in the company environment, for example small wood can still be used as direct material for a furniture and other handicraft company besides selling bark as fuel. In practice the proceeds from the sale of the remaining material like this can still be considered as other income after the removal of the residual the material.

2. Labor Costs (Direct Labor)

Labor costs are costs for labor placed and utilized in handling reparation process activities which are integrally used to handle all reparation equipment / facilities. so that the reparation process can be realized [Usry, 1995) In a shipyard company that embraces modern management, in completing a process / repair work, it does not carry out the entire repair process with its own workforce. Now the connection with other industries is very real in completing a repair process in a shipyard company environment. These industries are usually named after supporting industries of shipping industry that can produce :

  • Material.
  • Finished or semi-finished goods.
  • Services and or labor

Specifically for service industry companies or workforce suppliers called subcontractors that support workforce for shipyard companies, these subcontractors can be divided into :

  • Services and or labor that can be done by the shipyard company’s direct workers, including plate / welding work, pipe work.

  • Services and / or labor that cannot be done by the shipyard company’s direct labor, among other things: boiler work, radio work.

Sub-contractors who have expertise with the same type of work as the type of work of the direct workers of the shipyard company, then the costs are included in the direct labor costs. Whereas subcontractors who have expertise with the types of work that are not owned by the direct labor of the shipyard company, then the costs are included in the indirect costs. Therefore labor costs at shipyard companies can be divided into :

1) Direct labor costs alone.
2) Sub contractor fees.

3. Indirect Costs (Overhead)

Indirect or overhead costs are indirect material costs and indirect labor and other costs that arise and are needed to support the successful completion of the production / repair process.

Indirect Material Cost

Is the cost of materials used to support the success of a repair process, but does not become an integral part of the production produced, for example: fuel costs for diesel engines, electricity costs for driving production / lighting equipment / facilities, equipment costs, costs occupational safety and health, material costs for smooth work, for example: chalk, paint, etc.

Indirect Labor Cost

Labor costs are not directly utilized for the activities of the production process, but are used to support the success and speed of the production process, among others: marketing labor costs, administrative or personnel costs, calculation labor costs, material procurement and storage personnel costs, design / preparation labor costs / supervision of production and other costs.

Other costs included in the indirect costs incurred and which will arise in the completion of the repair process, but which are not included in indirect material costs and indirect labor costs, including: maintenance costs, depreciation costs, research and development costs , insurance costs, rental fees, marketing costs, working capital costs or bank interest.

Other Indirect Costs

Judging from the three types of costs above, the other indirect costs can be classified into two parts, namely :

Indirect Production Costs

Are indirect material costs, indirect labor costs and other costs, which are closely related to the success of the production process, or in other words indirect production costs are the costs incurred until the realization of production results outside of direct material costs and direct labor costs.

Included in indirect production costs are maintenance costs for workshops / equipment / production facilities, insurance costs, indirect material / labor costs required for the smooth and successful production process, depreciation costs for workshops / facilities / production equipment, costs for electric power / compressed air / fuel / fresh water used in the production process.

Indirect Administrative Costs

Is the cost of maintenance / insurance / depreciation of warehouse / office equipment or administration / warehouse / planning, taxes, working capital costs, marketing costs, and others.

Read more : Ship Design Theory

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