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Exploring Standard Cost and Variances

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GL Cost Set only. What an item should cost. Not automatically updated by the system ... labor rate) times actual labor hours (computed only when using Payroll module) ... – PowerPoint PPT presentation

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Title: Exploring Standard Cost and Variances


1
Exploring Standard Cost and Variances






















































Gary Morales/Michaela Sdunek
March 23, 2004
2
Standard Costing
  • GL Cost Set only
  • What an item should cost
  • Not automatically updated by the system
  • Generates Variances
  • Used to calculate COGS
  • Used to value inventory

3
Standard Costing Elements
  • Material
  • Labor
  • Burden (variable overhead)
  • Overhead (fixed overhead)
  • Subcontract

4
Standard Costing
  • Every Element has
  • This Level
  • Cost to obtain or produce an item
  • Lower Level
  • Costs of all purchased materials used in the
    final assembly
  • Any subassemblies
  • Lower level labor, burden, and subcontract are
    developed from the cost of making any lower-level
    subassemblies
  • Level is based on Product Structure

5
Standard Costs
6
Standard Costs
  • Material
  • Represents the cost of purchased materials
  • For a purchased item, the material cost is
    maintained in this level material field manually
  • For manufactured items, the material cost is
    maintained in the lower level material field
    manually by rolling product structures

7
Standard Costs
  • Labor
  • Represents the labor cost applied to this
    product, including setup labor
  • Labor cost is calculated from labor rates and
    run/setup hours at each operation in the items
    routing
  • Updated at this level by routing rollup
  • Updated at lower level by product structure rollup

8
Standard Costs
  • Burden
  • Represents the variable overhead applied to the
    item
  • Calculated based on labor and/or machine burden
    rates
  • Updated at this level by routing rollup
  • Updated at lower level by product structure rollup

9
Standard Costs
  • Overhead
  • Represents the fixed overhead cost for the item
  • Can be calculated as a percentage of other cost
    categories
  • Maintained manually for each item
  • Updated at lower level by product structure rollup

10
Standard Costs
  • Subcontract
  • Represents the cost of outside processing for an
    operation in a products routing
  • This level updated by routing rollup
  • Lower level updated by product structure rollup

11
Variances
  • Materials
  • Purchase Price Variance
  • CAUSE PO Receipt
  • EFFECT Difference between std rate _at_ this level
    and PO price

12
Material-Standard Cost
13
Variances
  • Materials
  • Material Rate Variance
  • CAUSE Components/Raw issued from another site
    with different costs
  • EFFECT Difference between std cost _at_
    manufacturing site and standard cost _at_ supplying
    site times qty issued

14
Material-Standard Cost
15
Variances
  • Materials
  • Material Usage Variance
  • CAUSE WO Close
  • EFFECT Qty per on a product structure times how
    many were produced vs. actually issued

16
Product Structure
Also called Parent Level or This Level
Level 0
Finished Good, Exhaust Manifold
Level 1
Manufactured 1 manifold but instead of using 1
manufactured flange, 2 were issued
005 Runners 1.0
007 Tube 1.0
006 Rockers 1.0
Level 2
17
Variances
  • Labor
  • Labor Rate Variance
  • CAUSE WO Close, Labor Feedback
  • EFFECT Std work center rate vs. actual labor
    rate (employees actual pay rate) times actual
    hours

18
14.5 Work Center Maintenance
19
Variances
  • Labor
  • Labor Usage Variance
  • CAUSE WO Close
  • EFFECT Std labor run setup on the routing
    operation times pcs produced vs. actual labor run
    setup

20
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21
Variances
  • Burden
  • Burden Usage Variance
  • CAUSE WO Close
  • EFFECT Std labor run setup on the routing
    operation times pcs produced vs. actual labor run
    setup

22
14.5 Work Center Maintenance
23
Variances
  • Burden
  • Burden Rate Variance
  • CAUSE WO Close, Labor Feedback
  • EFFECT Labor burden (actual std labor rate)
    times actual labor hours (computed only when
    using Payroll module)

24
14.5 Work Center Maintenance
25
Variances
  • Subcontract
  • Subcontract Rate Variance
  • CAUSE PO Receipt
  • EFFECT Subcontract std rate on the routing
    operation vs. actual rate from purchase order

26
Subcontracting Requirements
Routing Operations
Subcontract fields
27
Variances
  • Subcontract
  • Subcontract Usage Variance
  • CAUSE PO Receipt
  • EFFECT Subcontract pcs processed on the routing
    operation vs. received back on the purchase order

28
Subcontract purchase order information
29
Variances
  • Method Change Variance
  • CAUSE WO Close
  • EFFECT Residual left after all actual costs have
    been deducted from standard costs plus variances

30
Summary
  • Std Costs and Cost Elements are the base
    information to calculate variances against
  • Product Structure Routing Cost Rollups
  • Product Structures contain materials elements
  • Routings contain the labor and burden rates
  • Material Rate Usage Variance
  • Labor Rate Usage Variance
  • Burden Rate Usage Variance
  • Subcontract Rate Usage Variance
  • Method Change Variance

31
Questions?
Thank you for your time!
Gary Morales/Michaela Sdunek
March 23, 2004
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