reply to classmates week2

CLASSMAT # 1

Chapter 4 DB Topic #1 (2 original replies only)

The "Supply and Demand Influence Lumber Prices" blurb is relatively obvious.  Basically it explains that since the housing market was down in 2005-2009, lumber mills reduced their output dramatically as there was a much smaller demand for lumber.  In 2010, many homebuilders were building homes as there was an expiring federal credit that made buying a home more enticing.  Thus, the drop in supply coupled with the increase in demand lead to a much higher cost.  The blurb then also explains that builders use job-order costing systems so that they can buy materials when more appropriate and track costs of each home.  

In homebuilding, direct materials would include wood, drywall, wiring, sheet metal ducts, piping, flooring, and much more yet.  Direct labor would be the actual construction workers, carpenters, masons, and other employees of the homebuilder.  Overhead costs could include salaries of sales folks, renting the porta-potty on site, and gas for heating the areas where the workers are.  

If one homebuilder is responsible for an entire neighborhood, a job-order costing system would be useful because it allows for discounts when buying materials in bulk.  Additionally, it could lessen overall shipping costs when those costs are shared for all homes.  It also lessens the effects of outliers in the overall project as the more typical homes would maintain that average.  

Non-custom homebuilders only have certain numbers of style homes for similar reasons.  Those styles, while different, are similar enough that materials can still be purchased in bulk.  It also lessens the workload of the actual builders because they can repeat much of the work rather than learning and starting from scratch each time.