the general cost of maintenance via actions such as testing, tooling, administration, supervision, and controlling, which a company takes up for any given project or work at hand. Also referred to as indirect maintenance cost.
How Maintenance Burden Works
A maintenance burden is a financial allocation set aside by a company during any manufacturing process. This amount laid out serves as a fallback option when machinery and other tools or production essentials require repair or maintenance. For a company, they leave an indirect maintenance cost under the care and supervision of the production manager. With these funds, the production supervisor does not need to go through a filing series to fund the maintenance and repair of a faulty machine or tool.
Manufacturing processes take their toll on the tools and machinery in use. Over time the need for repair and maintenance is essential. During the financial budgets made by manufacturing companies, they lay out the overhead costs to cover various tasks and equipment or materials needed for the production. Within this overhead cost, the company stipulates the maintenance burden.
The fund reduces delays in repair funds when machines and tools break down and ensure that these machines have a longer lifespan through regular maintenance and care. In some cases, when companies are coming together to handle a project, they draw out a maintenance burden agreement. This agreement states the company is taking the task of covering the maintenance burden during production.
Example of a Maintenance Burden
Gregory Construction Company is a road construction company that seeks to build a road. They have listed all the expenses required to build the road, which sums up to $50,000. Within this calculation, the company needs to allocate funds to the maintenance burden. Here is how the company spreads the sum;
- Costs of the facility to be rented - $20,000
- Costs of utilities - $10,000
- Payment of legal fees to the authorities - $2,000
- Tax - $1,000
- Other operating expenses include insurance, health and safety, and a maintenance burden - $12,000
Note that the maintenance burden, insurance, and other running expenses should have a specific amount allocated to them in a more detailed financial report.
Significance of a Maintenance Burden
For every production or manufacturing company, the duty of the funds allocated for a maintenance burden covers various tasks. First, the maintenance burden serves to improve the production output. Second, if a breakdown occurs, there will be no need for an extended processing time for funds to be released since a specific fund is already in place.
In another scenario, production and manufacturing require a lot of hours of consistent work, affecting the tools or machinery. Regular care and maintenance can elongate the lifespan of these tools. In the long run, the maintenance burden reduces financial expenses and improves production output.
Maintenance Burden vs. Manufacturing Overhead
The maintenance burden is executing a project that requires planning, coordinating, administering, tooling, and controlling labor and overhead activities. On the other hand, manufacturing overhead is an indirect cost incurred while executing the project or production.
The maintenance burden is often referred to as indirect maintenance cost. This is because it helps cater to the production process from inception to completion. However, manufacturing overhead is an ongoing expense in connection to the operation of a business or production. It can be from either cost of administration or the cost of marketing.