Manufacturing - Labor Costs

[ja...@productive1.com]

When calculating labor costs in a production run it is my understanding
that the system will use the Costs from the Routing Tasks.  That costs
is set up in the accounting manager either as a Fixed Costs, Variable
Costs, or Per Millisecond costs.

If you would the system to calculate the Actual Labor costs which one of
the 3 areas above will it use for calculation?  When declaring actual
time spent on a routing tasks what is the unit of measure?  Is is
milliseconds, seconds, or minutes.  Am I correct in assuming that it
will take the actual set up time & actual production time multiply it by
the cost component from the tasks and divide by the quantity produced?

Thanks,

James

Re: Manufacturing - Labor Costs

[Pierre Smits <pi...@apache.org>]

Hi James,

I guess you're referencing [1].

The three types of cost are calculated cost based on projections (budgets,
utilisation estimates, etc.) done at the beginning of a period, and are
used to determine the total estimated (or budgetary, but also the
'calculated' ) cost of a production run. When factoring spillage (or waste)
this yields a calculated cost per unit produced in the production run.This
is not actual cost!

In a nutshell, the actual cost of an executed (and completed) production
run is based on:

   - actual material (components/ingredients spent on each of the tasks) +
   - actual time spent by all directly allocatable persons (internal,
   external) * actual time rate +
   - actual utilisation of production equipment * utilisation fee/price +
   - directly allocatable overhead (optional, depending on what kind of
   costing schema is applied/used within the organisation [2])

Thus on [1] and the related CostComponentCalc entity [3] the

   - fixedCost field is for the amount that is to be applied (through the
   costCustomMethod) to whole task
   - variableCost field is for the amount that is to be applied for every
   unit produced in the tasks (also with factoring in a costCustomMethod)
   - perMilliSecond field is for the amount that is to be applied for every
   milisecond of the task (based on endDate/time -/- startDateTime), and again
   factoring in a costCustomMethod.

As you can realise none of the above is suitable to determine the actual
labor cost of a task, but quite suitable to determine the 'calculated'
cost. These cost are then (administratively) set against the actuals.
Regarding the cost of labor on a task: the actuals are done via accounting
(through payroll calculations/invoicing from sub-contractors), and the
calculated cost can be derived through time registration * rate.

I trust the above helps.

[1] https://demo-trunk.ofbiz.apache.org/accounting/control/EditCostCalcs
[2] Activity Based Costing vs Process Costing vs Traditional Costing

Best regards,

Pierre Smits

*Apache Trafodion <https://trafodion.apache.org>, Vice President*
*Apache Directory <https://directory.apache.org>, PMC Member*
Apache Incubator <https://incubator.apache.org>, committer
*Apache OFBiz <https://ofbiz.apache.org>, contributor (without privileges)
since 2008*
Apache Steve <https://steve.apache.org>, committer


On Fri, Nov 30, 2018 at 7:10 PM <ja...@productive1.com> wrote:

>
> When calculating labor costs in a production run it is my understanding
> that the system will use the Costs from the Routing Tasks.  That costs
> is set up in the accounting manager either as a Fixed Costs, Variable
> Costs, or Per Millisecond costs.
>
> If you would the system to calculate the Actual Labor costs which one of
> the 3 areas above will it use for calculation?  When declaring actual
> time spent on a routing tasks what is the unit of measure?  Is is
> milliseconds, seconds, or minutes.  Am I correct in assuming that it
> will take the actual set up time & actual production time multiply it by
> the cost component from the tasks and divide by the quantity produced?
>
> Thanks,
>
> James
>