2011-12 Financial Literacy within Technological Financial Literacy within Technological Education 1…

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  • 2011-12 Financial Literacy within Technological Education


    Manufacturing Technology Since making financial decisions has become an increasingly complex task in the modern world, people need to have knowledge in various areas and a wide range of skills in order to make informed decisions about financial matters. They need to be aware of risks that accompany various financial choices. They also need not only to develop an understanding of world economic forces, but also to become aware of ways in which they themselves can respond to those influences and make informed choices. It is therefore essential that financial literacy be considered an important attribute of a well-educated population so that Ontarians may continue to prosper in the future. Financial literacy may be defined as having the knowledge and skills needed to make responsible economic and financial decisions with competence and confidence.1 In addition to acquiring knowledge in such specific areas as saving, spending, borrowing, and investing, students need to develop skills in problem solving, inquiry, decision making, critical thinking, and critical literacy related to financial issues. The goal is to help students acquire the knowledge and skills that will enable them to understand and respond to complex issues regarding their own personal finances and the finances of their families, as well as to develop an understanding of local and global effects of world economic forces and the social, environmental, and ethical implications of their own choices as consumers. This lesson plan along with other BBT lesson plans were developed by members of the Ontario Council for Technology Education (OCTE) in conjunction with the Ministry of Education. The lessons will be posted on the Ontario Education Resource Bank (OERB) https://resources.elearningontario.ca/

    Contact Information


    Development date

    July 2011

    Contact person

    Paul Fraser


    Curriculum Chair for Technology, Business, and Computer Science






    paul.fraser@dcdsb.ca or ptfraser@yahoo.ca

    Course Name

    , Manufacturing Engineering Technology

    Course code


    Name of lesson plan

    Determining the Cost of Manufacturing

  • 2011-12 Financial Literacy within Technological Education

    2 Brief description of lesson plan

    This lesson introduces the student(s) to the process of determining the overall cost of manufacturing (based upon the development of overhead and unit costs). During the lesson, the students will be exposed to and learn the associated terminology.

    Duration 2-3 Periods

    Overall expectations

    FUNDAMENTALS A1. describe the business operations associated with manufacturing and explain their role in product development A2. demonstrate an understanding of how to optimize individual or mass production systems by improving material flow, factory design, product layout, labour productivity, and quality control A4. apply relevant mathematical skills, scientific concepts, and technological literacy and communication skills in planning and implementing manufacturing processes. SKILLS B2. demonstrate an understanding of the management of a manufacturing enterprise and the interrelationships among its major areas of activity such as marketing, cost control, quality assurance, production, and inventory control;

    Specific expectations

    A1.4 identify factors to be considered in estimating the cost of manufacturing a product (e.g.,labour and materials, capital equipment, process costs, location/transportation) and explain their importance A2.2 demonstrate an understanding of factors associated with labour costs in manufacturing a product (e.g., labour-intensive versus capital intensive production methods; use of unskilled, semi-skilled, and skilled labour); A4.1 apply advanced mathematical skills in performing a variety of tasks required within the context of manufacturing design and production (e.g., calculate machine feeds and speeds, estimate costs, calculate ratios, calculate angles using trigonometry) A4.3 use appropriate technical language and forms of communication related to the design, fabrication, and control of a product (e.g., when preparing and explaining flow charts, operations and inspections charts, job descriptions, lists of tooling requirements, quality-control program materials; when describing certification requirements and specialized training; when making presentations; when completing a bill of material). B2.1 demonstrate an understanding of management roles in the development of a product (e.g., planning: setting goals to establish course of action; organizing: structuring the job into manageable tasks; directing: assigning tasks and supervising their completion; controlling: comparing results against the original plan);

    Catholic graduate expectations (if applicable)

  • 2011-12 Financial Literacy within Technological Education

    3 Essential Skills and work habits

    . Essential Skills

    Reading Text X Writing X Document Use X Computer Use X Oral Communication


    Money Math: Scheduling or Budgeting and Accounting: Measurement and Calculation X Data Analysis X Numerical Estimation X

    Thinking Skills Job Task Planning and Organizing Decision Making X Problem Solving X. Finding Information X

    Work habits

    Working Safely Teamwork X Reliability Organization X Working Independently X Initiative X Self-advocacy X Customer Service Entrepreneurship

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    4 Instructional/Assessment Strategies Teachers notes Prior to the activity: The teacher must ensure that: -the students have computer login ability -the students have access to a computer, printer, and word processing software -the students have a copy of the assignment and associated handouts -the students understand the requirements/expectations of assignment

    Context Every business must be able to determine the cost of their product or service. To do this they need to be able to understand and determine the overhead cost and the product cost. From this, sales prices can be generated.

    Strategies -brainstorming/class discussion (used as prior learning assessment tool during topic

    introduction; What must be considered to determine the cost of manufacturing) -socratic lesson (present the lesson, distribute the terminology assignment) -class discussion (review completed terminology assignment) -socratic lesson (introduce the calculation assignment) -group/team work (discuss techniques, division of work, project management) -

    presentation -peer review

    Note: for those having difficulty or not progressing, it is recommended that they work closely with the instructor

    Assessment and Evaluation of Student Achievement As you plan, please keep the following important considerations in mind: How will we know students are learning? How will we know students have learned? How will the students demonstrate progress

    towards the desired learning? How will the students demonstrate

    achievement of the desired learning? What criteria will be used to determine whether

    the students are learning? What criteria will be used to determine that

    students have learned? What assessment strategies/tools will best

    gather evidence during learning? What assessment strategies/tools will best

    gather evidence that the students have learned?

    Will the assessment tasks provide opportunities for students to demonstrate the full range of their learning in a variety of ways?

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    5 Strategies/Tasks

    Purpose Assessment for Learning (diagnostic, formative) Assessment of Learning (summative, evaluation)

    1. Conferencing Assessment for learning-daily conferencing to discuss project completion progress and importance of accurate data gathering (teacher/peer/self review)

    2. Observation Assessment for learning-observation of how the team is functioning (team work dynamics) followed by feedback (oral and anecdotal)

    3. Demonstration Assessment of learning-completion of the assignment

    4. Presentation Assessment of learning-presentation to the class describing their findings and presenting their suggestions

    5. Reflection Assessment for future learning and assessment of learning-the students complete a personal reflection on the knowledge gained from the activity Assessment tools

    -marking guidelines (calculation and terminology), Appendix 3 and 5 -observational/annecdotal notes and oral conferencing -presentation rubric, Appendix 7

    Additional Notes/Comments/Explanations Additional exemplars of cost calculations would be an asset A guest speaker from a manufacturing engineering department and/or a cost control department would be an asset to the introduction of the topic This topic could be used as the introduction to Cost Control and Accounting, Methods Engineering, Work Measurement (labour standard times), and Operation Efficiency.

    Resources Authentic workplace materials Daily labour reports, process routing with labour standard times

    Human resources Manufacturing teacher, business teacher, industry guest speaker(s), fabrication/manufacturing business owners

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    6 Print Handouts- Presentation Techniques; appendix 6, Presentation Rubric; Appendix 7


    Software Microsoft Office or equivalent

    Websites See attached resource list, Appendix 8



    -Team/small group work (partners) -Additional time to complete -Students may work with the instructor -Students may work with an Educational Assistant or in program support. -Students may use a fill in the blank template

    List of Attachments Appendix 1 The Cost of Manufacturing Lesson Notes Appendix 2 Terminology Assignment Appendix 3 Terminology Marking Guideline Appendix 4 Costing Assignment Appendix 5 Costing Marking Guidelines Appendix 6 Presentation Techniques Appendix 7 Presentation Rubric Appendix 8 Website Resources Appendix 9 Figure 1

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    Appendix 1 The Cost of Manufacturing - Lesson Notes

    Cost Accounting role and definition: The process of identifying and evaluating production costs When talking about the cost of manufacturing, most people are referring to the unit cost of manufacturing a product which is determined by the direct labour and material costs associated with that product. The true cost of manufacturing requires a more indepth analysis as it is affected by several factors. For example: Manufacturing Overhead

    This includes such things as the electricity used to operate the factory equipment, depreciation on the factory equipment and building, factory supplies and factory personnel (other than direct labour).

    Nonmanufacturing Overhead

    This includes activities associated with the Selling and General Administrative functions. Examples include the compensation of nonmanufacturing personnel; occupancy expenses for nonmanufacturing facilities (rent, light, heat, property taxes, maintenance, etc.); depreciation of nonmanufacturing equipment; expenses for automobiles and trucks used to sell and deliver products; and interest expenses. (Note that factory administration expenses are considered part of manufacturing overhead.)

    Unit Cost

    This is the cost to manufacture a product based upon the material used (material cost) and the direct labour used to make the product.

    To simplify things, some companies combine the manufacturing and nonmanufacturing overheads and call it simply the business overhead or company overhead and it is sometimes referred to as the operating cost. This is straight forward for companies that only produce one product. However for companies that produce multiple products throughout the year, the overhead maybe determined on a more frequent basis (e.g. monthly) Once the overhead has been determined, the calculation becomes:

    (business overhead) +unit cost (quantity of product)

    Note// The overhead is amortized over the production quantity as this generates an overhead cost per product.

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    8 Example A small specialty fabrication/manufacturing company produces 700,000 brackets per year. The company operates out of a small industrial unit and has 5 employees, 2 out front (administration), 1 sheet metal worker (direct labour), 1 welder (direct labour), and 1 shipper/receiver. The bracket is made from a strip of mild steel that is bent to 90 degrees, then reinforced with a welded gusset. Using the data below, determine the overhead cost, the unit cost, and the cost of manufacturing. Determine the sales price per bracket if a 35% sales margin is applied to the cost. Finally determine the annual gross sales ($). Data: -rent and utilities $1200.00 per month = $14400.00 per year -taxes $10,000.00 per year -annual maintenance $1400.00 per year -office employee salaries $32,000 per year -direct labour $27.00 per hour -indirect labour $15.00 per hour = $26,388.00 per year -standard working day 7.33 hours -standard working year 48 weeks -material cost per bracket $0.85 -labour to weld 2 minutes (0.033 hours) per bracket -labour for sheet metal 3 minutes (0.05 hours) per bracket Unit cost: Weldinglabour cost 0.033 hours x $27.00/hr = $0.89 Sheet metal labour cost 0.05 hours x $27.00 = $1.35 Material cost per bracket = $0.85 Total cost per unit = $3.09 Overhead cost: rent and utilities $14400.00 per year -taxes $10,000.00 per year -annual maintenance $1400.00 per year -salaries $64,000.00 per year -indirect labour (shipper) $26,388.00 per year Total overhead $116,188.00 per year Quantity produced per year 700,000 units Cost to manufacture: ($116,188/700,000) + $3.09 = $3.25 per unit Sales price with a 35% margin $3.25 x 1.35 = $4.39 per bracket Annual gross sales: 700,000 x $4.39 = $3,073,000.00

  • 2011-12 Financial Literacy within Technological Education


    Appendix 2 Terminology Assignment Research and write a definition for each of the following terms (3 marks each): Direct Labour- Indirect Labour- Labour Standard or Time Standard- Labour Rate- Production Efficiency- Earned Hours- Actual Hours- Manufacturing Overhead- Nonmanufacturing Overhead- Cost Control- Inventory- Unit Cost- Work in Progress (WIP)- Raw Material- Flow Time (build time)- Primary Fabrication- Secondary Fabrication-

    T /51

  • 2011-12 Financial Literacy within Technological Education


    Appendix 3 Terminology Definitions Marking Guidelines

    Direct Labour- Employees or workers who are directly involved in the production of goods or services. Direct labor costs are assignable to a specific product, cost center, or work order. Indirect Labour- Wages and related costs of factory employees, such as inspectors and maintenance crews, whose time is not charged to specific finished products; sometimes combined with indirect materials costs, such as supplies, to derive indirect costs Labour Standard or Time Standard- Efficiency standard that is often set via time and motion studies and laboratory experiments regarding the various labor operations needed to produce the finished good. The standard time must incorporate allowances for normal loss of time due to rest periods, machine downtime, and fatigue. It may be computed as follows: Labour Rate- The cost per hour for non salaried employees Production Efficiency- A ratio of earned hours (labour standard) versus actual hours (actual time taken/reported) used to determine the production efficiency of an operation. (Earned Hours/Actual Hours) X 100 Earned Hours- The time in standard hours credited as a result of the completion of a given task or a group of tasks. Actual Hours- The actual time spent on a given task or a group of tasks Manufacturing Overhead- This refers to indirect factory-related costs that are incurred when a product is manufactured e.g. electricity used to operate the factory equipment, factory supplies and factory personnel (other than direct labor). Nonmanufacturing Overhead- Nonmanufacturing costs (administrative overhead) represent a manufacturers expenses that occur apart from the actual manufacturing function e.g. occupancy expenses, salaries of non manufacturing staff (secretaries, accountants, etc.), expenses for automobiles and trucks used to sell and deliver products.

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    11 Cost Control- The process or activity on controlling costs associated with an activity, process, or company. Cost control typically includes (1) investigative procedures to detect variance of actual costs from budgeted costs, (2) diagnostic procedures to ascertain the cause(s) of variance, and (3) corrective procedures to effect realignment between actual and budgeted costs Inventory- A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold Unit Cost- The cost of a product or unit (direct labour $ + material $) Work in Progress (WIP)- Work that has not been completed but has already incurred labour costs Raw Material- A material or substance used in the primary production or manufacturing of a product e.g. steel, lumber Flow Time (build time)- Sometimes referred to as scheduled time. This is not the actual time taken to produce the product, but the total scheduled time allowed for the entire process (start to shipping) Primary Fabrication- The initial stage(s) of a manufacturing process. The initial conversion/use of raw materials in the fabrication of product(s) e.g. cutting components out of steel sheet stock that will be welded together at a later stage of the production process Secondary Fabrication- Subsequent stage(s) of a manufacturing process that combines the components created during primary fabrication e.g. creating a welded sub-assembly from cut out components

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    Appendix 4 TMJ 3/4M Manufacturing Costs

    The purpose of this assignment is to develop the necessary skills and knowledge required to determine the cost of manufacturing a product. Scenario: A medium sized manufacturing company produces mobile (truck mounted) cranes. The company employs 100 union and 30 non union employees. 300 base models are see (fig 1) produced annually. These units are trimmed out to customers specifications (optional extras) when they are sold. The factory area is 10,000 square metres and is owned, not leased. Note this assignment should be completed by the production team(s), however it can be completed individually at the discretion of the instructor. Tasks: A/Using the data below, determine:

    (K/U /10) The base unit cost (K/U 20) The manufacturing cost of a base unit (K/U /5) The sales cost of a base unit if a 35% sales/profit margin is applied.

    B/Explain (reflect upon) why and how this activity could be used during the completion of a class project

    (T /15) This should be a minimum of 2 paragraphs and include a method to obtain and track the data


    (Com /10)Present your findings from task B and invite peer critique

    D/ Application (App /20) Using the knowledge gained and the data provided (labour rates, labour standards/estimates, and material cost), apply this to your current project and calculate the unit cost

    E/ Optional Enrichment Activity (bonus marks)

    (App /20) Create an electronic spread sheet that could be used to calculate the manufacturing cost, unit cost, and sales price

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    Data: Profit margin

    35% Labour rates Direct $22.50 /hour Indirect $18.75/hour ($137.43/day, $35,733.75/year) Standard labour day = 7.33 hours per person Areas of Manufacture:

    Primary fab (machining, sheet metal) Secondary fab (welding) Assembly (hydraulic hook up, components) Finishing (prime paint only) Shipping (takes 2 people 4 hours to package and ready the shipment of one crane) This would be 8 hours indirect

    Area Direct labour/Unit Total

    Time (direct labour)

    Indirect labour

    Total Time (indirect labour)

    Primary Fab 16.25 hours 16.25 Secondary Fab 12.33 hours 12.33 Assembly 18.25 hours 18.25 Finishing 6.33 hours 6.33 Shipping 8.0 hours XXXXXXXXXXX XXXXXXXXXXX 53.16

    Hours XXXXXX 8.0 Hours

    Flow time (start to finish) per unit -28 hours (or 3.8 standard days) Material costs Raw material-$2835.00 Purchased material-$9800.00 Operating Expenses

    -utilities $2500.00 per month = $30,000.00 per year -taxes $13,000.00 per year -annual maintenance $14000.00 per year -office employee salaries $640,000.00 per year

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    Appendix 5 TMJ3/4M Manufacturing Costs Answer Key

    Task A: Base Unit Cost

    Total material cost (raw and purchased materials) $2835.00 + $9800.00 = $12,635.00

    Direct Labour Cost 53.16 hours x $22.50 /hour = $1196.10 per unit Total unit cost = $12,635.00 + $1196.10 =$13,831.10

    Manufacturing Cost Per Base Unit (operating cost/unit quantities + unit indirect cost) + unit cost = manufacturing cost

    Unit cost = $13,831.10

    Unit indirect cost = 8 hours x $18.75/hour = $150.00

    Total operating expenses -utilities $2500.00 per month = $30,000.00 per year

    -taxes $13,000.00 per year -annual maintenance $14000.00 per year -office employee salaries $640,000.00 per year Total expenses- $30,000.00 + $13,000.00 + $14,000.00 + $640,000.00 = $697,000.00

    Manufacturing cost per unit ($697,000.00/300 + $150) + $13,831.10 = $16,304.43

    Sales Cost Per Base Unit Profit margin- 35% $16,304.43 x 1.35 = $22,010.98

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    Appendix 6 Presentation Techniques/Guidelines

    Many presentations have been ruined by being unprepared and the use of bad technique. Below is a listing of some of the most effective techniques. Remember presentations should engage the audience, not overwhelm them or bore them. 1. Use visual aids Using pictures in your presentations instead of words can double the chances of meeting your


    2. Keep it short and sweet There is an old adage that said No one ever complained of a presentation being too short.

    Nothing kills a presentation more than going on too long.

    3. Use the rule of three A simple technique is that people tend to only remember three things. Work out what the three

    messages that you want your audience to take away and structure your presentation around

    them. Use a maximum of three points on a slide.

    4. Rehearse Practice makes for perfect performance. Many experts say that rehearsal is the biggest single

    thing that you can do to improve your performance. Perform your presentation out loud at least

    four times. One of these should be in front of a real scary audience. Family, friends or


    5. Tell stories, question the audience All presentations are a type of theatre. Tell stories and anecdotes to help illustrate points. It all

    helps to make your presentation more effective and memorable.

    6. Lose the bullet points dont put your speaker notes up on the screen Bullet points are the kiss of death for most presentations. Most people use bullet points as a

    form of speaker notes. To make your presentation more effective put your speaker notes in your

    notes and not up on the screen.

    7. Video yourself Set up a video camera and video yourself presenting. You will see all sorts of mistakes that you

    are making, from how you are standing, if you are jangling keys, to how well your presentation is


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    16 Appendix 6 Presentation Techniques/Guidelines - Continued 8. Know what slide is coming next; be prepared! You should always know when presenting which slide is coming up next. It sounds very powerful

    when you say On the next slide [Click] you will see, rather than a period of confusion when

    the next slide appears.

    9. Have a back-up plan Murphys law normally applies during a presentation. Technology not working, power cuts,

    projector blowing a bulb, spilling coffee on your front, not enough power leads, no loudspeakers,

    presentation displays strangely on the laptop all of these are things that have happened in

    presentations that I have given.

    Have a back-up plan. Take with you the following items a printed out set of slides (you can

    hold these up to the audience if you need to), a CD or data stick of your presentation, a laptop

    with your slides on it. Just in case it goes wrong.

    10. Check out the presentation room Arrive early and check out the presentation room. If you can make sure that you see your slides

    loaded onto the PC and working on the screen. Work out where you will need to stand.

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    17 Appendix 7

    Oral Presentation Rubric : Manufacturing Costs

    Teacher Name: Student(s) Name(s): ________________________________________

    CATEGORY 4 3 2 1 Preparedness Student is

    completely prepared and has clearly rehearsed.

    Student seems prepared but might have needed a couple more rehearsals.

    The student is somewhat prepared, but it is clear that rehearsal was lacking.

    Student does not seem at all prepared to present.

    Speaks Clearly Speaks clearly and distinctly all the time, and mispronounces no words.

    Speaks clearly and distinctly all the time, but mispronounces one word.

    Speaks clearly and distinctly most of the time. Mispronounces no more than one word.

    Often mumbles or can not be understood OR mispronounces more than one word.

    Content Shows a full understanding of the topic.

    Shows a good understanding of the topic.

    Shows a good understanding of parts of the topic.

    Does not seem to understand the topic very well.

    Vocabulary Uses vocabulary appropriate for the audience. Extends audience vocabulary by defining words that might be new to most of the audience.

    Uses vocabulary appropriate for the audience. Includes 1-2 words that might be new to most of the audience, but does not define them.

    Uses vocabulary appropriate for the audience. Does not include any vocabulary that might be new to the audience.

    Uses several (5 or more) words or phrases that are not understood by the audience.

    Posture and Eye Contact (Com)

    The group stands up straight, looks relaxed and confident. Establishes eye contact with everyone in the room during the presentation.

    The group stands up straight and establishes eye contact with everyone in the room during the presentation.

    The group sometimes stands up straight and establishes eye contact.

    The group slouches and/or does not look at people during the presentation.

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    Appendix 8 Websites Resources

    Principles of cost control http://www.fao.org/docrep/T0579E/t0579e03.htm

    Cost Control Techniques http://www.buzzle.com/articles/cost-control-techniques.html Case study http://www.hbmaynard.com/CaseStudies/2004/DanaCorp01-20-04.asp Institute of Industrial Engineers http://www.iienet2.org/Default.aspx Institute of Industrial Engineers (IIE) Atlantic Chapter http://industrialengineering.dal.ca/Undergraduate%20Studies/Canadian_Society_for.php

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    Appendix 9 - Figure 1


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