Analysis of Cost Growth and Cost Composition in the Defense Aerospace Industry

摘要

The objective of this thesis was to determine if 'real' cost growth occurred in the defense aerospace industry during the period 1980 to 1986 and if the percentage of overhead costs to total cost increased during the same period. Cost data from 16 defense aerospace plants were studied results of the hypothesis tests indicate that there was no 'real' cost growth in the industry during this period and that overhead costs did not increase relative to total cost. However, when contractors in the sample were tested individually, results indicate that eight of the sixteen contractors experienced significant cost growth. The conflicting results may be due to the wide dispersion of the data points used in the statistical tests which, in turn, may be caused by the differing variety of aerospace industry segments. Descriptive statistics computed for the study's sample show that the percentage of direct labor, direct material, other direct charges, and overhead to total cost remained stable over the year period. Although overhead costs were not found to be increasing relative to total cost, they still make up the second largest component of total cost (32%) behind direct materials (42%). The size of the overhead cost component combined with the perception that these costs are less controllable than direct costs, provides support for the DOD initiative to have contractors reduce their overhead costs.(edc)