This article’s focus is how cost accounting allocates costs of a manufacturing plant. All things are hypothetical. The conclusions of this report regarding costing of commercial services provided by Goodyear Tire should be recognized as a theory of the way Goodyear Tire conducts business activities, rather than suggestions of how Goodyear Tire should conduct business.
Goodyear Tire is a publically traded company, which has many different types of plants such as synthetic rubber tire mold, retreading tire, aircraft tire, chemical plants, and tire plants throughout North America, Europe, Middle East and Africa, Latin America, and Asia. (Goodyear Tire Corporation) In addition to the previously listed plant locations, Goodyear Tire has several joint ventures and plant subsidiaries in various locations.
In the midst of a large corporation, there are common factory departments, which Goodyear uses to maintain financial goals: research and development, maintenance, manufacturing, sales, services, and quality assurance/inspections. Goodyear Tire (Goodyear) has several tire products and multiple contracts with other corporations worldwide. This paper will focus on one product, the basic tire, and one hypothetical contract.
Goodyear’s leading corporate goals are to increase customer service and sales, reduce costs, and increase plant output. Like other corporations, the economy has affected Goodyear. Currently, even though the number per persons driving cars has increased throughout the world, sales remain well below previous years. (Goodyear Corporation)
However, there are several ways Goodyear can still reduce costs and still produce an excellent product. One way is to eliminate outsourced labor. For example, suppose Goodyear has contracts with subcontractors to repair its tire molds. In these contracts, Goodyear even pays the rent on the subcontractors’ buildings. Goodyear already has the resources,...