Establishing Standard Cost Rates

For each operation code, you must establish the standard cost per hour and/or cost per piece to charge for labor and overhead. The rate specified in Operation Code Maintenance is used to calculate the planned cost for a work order. This rate can also be used to calculate actual costs when labor transactions are recorded in Work Order Transaction Entry if the Charge Labor at Employee Rate check box is cleared in the Work Center Maintenance window. You can leave the Planned Cost fields blank for outside process steps because the standard rate(s) can vary from work order to work order based on individual bids.

The standard cost rate consists of the Rate/Hour and the Rate/Piece fields in the Operation Code Maintenance window. The rate per hour is multiplied by the number of hours required for the operation to calculate the cost. The rate per piece is multiplied by the quantity of products processed for the operation to calculate the cost. You can enter both the rate per hour and rate per piece for an operation. For example, you can charge $20.00 per hour for an operation plus $0.05 per piece processed.

When the rate-per-piece cost rate is used to calculate accrual costs, a labor transaction must be entered with the number of hours worked and quantity completed. The number of hours worked cannot be zero.

If labor steps are assigned an operation code that contains a rate-per-piece entry greater than zero, a labor transaction must be entered with a quantity completed for the rate per piece to be included in the accrued Work in Process labor costs. Standard labor costs are not calculated for outside processing work centers.

If operation codes for the labor steps are assigned a rate-per-piece entry greater than zero, a quantity completed must be entered for each labor transaction so that the rate per piece is included in the accrued Work in Process labor costs.

If the Charge Labor at Employee Rate check box is selected for the work center in the Work Center Maintenance window, the standard labor rate for the employee entered in Production Employee Maintenance is multiplied by the number of hours recorded for the operation to calculate the actual labor cost. The rate per piece, if any, for the operation code is added to the labor cost to determine the total actual cost. The planned cost, however, still uses the rate per hour specified for the operation code in its calculation.

For more information, see:

Operation Code Maintenance