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We have a calculated cost per hour of $120 with a Charge Out Rate of $250.
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We have added ANODISING to a Works Order, we are needing to run these 40 items through the ANODISING bath once, all at the same time, So the Qty = 1.
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You can see our run through the bath has a Cost of $120.
Here you can see the Labour & Machines on the front screen of the Works Order. The Labour is the 1 hour of annodising time @ $38.45 per hour.
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Time Sheet Entry
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Here is the time sheet associated with the Anodising, you will notice that the Estimated cost is $158.45. That is $120.00 of machine costs, plus the labour @ $38.45 per hour.
And our actual costs on the Works Order show the Actual Machine time cost as well as the actual Labour cost.
Upon Stocking of this Works Order $231.65 will be transferred from Work In Progress into Inventory, and $-12.45 will appear in the GL account as a Variance, being the difference in value between the transferred cost, which is based on the estimate, and the actual cost ($219.20) based on the Works Order actual values.
Conclusion, you
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Also notice that we have updated the Production Quantity of the Anodising at the bottom of the Time Sheet. This gets transferred to the Works Order.
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Back on the Works Order we can see the time sheet has updated the Totals on the front screen. You can see that the Actual Labour is $26.00 not the $38.45. The $26 is what the guy actually get’s paid.
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TimeSheet Posted - GL Entries made
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If we have a look at the Timesheet entries that were made in the General ledger we can see the following:-
AC1330 | Work In Progress Account | $26.00 | Increase WIP by the Labour Cost |
AC1440.20 | WIP Time Sheet costing | -$26.00 | |
AC1330 | Work In Progress Account | $120.00 | Increase WIP by the Machine Cost |
AY51300.25 | WIP - Usage Variance | -$120.00 |
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Stocking of the Works Order
Due to the way this client’s system is set up, we are using the Estimated Cost (not the Actual cost) for any Manufacturing Stock (Stock transfer from WIP).
So upon Stocking of this Works Order $1204.36 (being the ‘Estimated Cost’ will be transferred from Work In Progress into Inventory.
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Conclusion
You can use Machine Operations to better reflect the ‘perceived’ cost of an operational step. The system (in this case) will continue to use the estimated cost from the Works Order, but the estimate now reflects the cost rate. This flows through to any linked Sales order.