Exercise 7: Subcontract & Routing Cost Report
1 The item 50010 which you used for the Phantom item exercise has a subcontract operation 15 for electroplating. A good place to see this is the Routing Cost Report (14.13.14). Run this report for item 50010.
Note the subcontract cost for operation 15. This is also shown on the Product Structure Cost Report you used in the Phantom exercise. Subcontract operations are costed the same as any purchased item.
2 The Product Structure Cost Report only shows the total labor and burden. Run the Routing Cost Report for item 01050 with the order quantity set to 10. Remember you are looking at per unit costs based on an order quantity of 10. Thus each unit has one tenth of the setup cost. This report shows the setup cost, the run cost and the burden costs for each operation.
In this example you see the total setup cost of 1.25 (0.25hr * 5.00/hr setup rate).
At operation 10 the run cost is 1.25 (0.25hr * 5.00/hr labor rate).
At operation 10 the per unit set up cost (setup cost/order qty) = (1.25/10) = 0.125 is added to the run cost to get the total labor cost at operation 10 of 1.375.
The labor burden is 10% of the labor cost based on the work center or 0.1375.
The machine burden is the (mach. Bdn rate * run time hrs) + (mach. Bdn rate * setup hrs/unit) or (1X0.25 + 1X0.25/10) = (0.25 +0.025) = 0.275.
