Cost Set Categories
Five categories of costs are tracked for each cost set. These categories maintain cost for both this-level and lower-level costs. This-level cost is the cost added at the current stage of manufacturing or the cost of a purchased item. Lower-level cost represents cost added at prior stages of manufacturing.
A purchased item has this-level material and, optionally, material overhead cost, but no lower-level costs. A manufactured item has this-level labor, subcontract, burden, and overhead cost, but normally no material cost. A manufactured item has lower-level material cost for components and any subassemblies, and possibly lower-level labor, burden, subcontract, and overhead from the cost of making any lower-level subassemblies.
The following are the various cost set categories:
• Material. The total cost of purchased material. For purchased items, material costs are maintained for each item or item and site. For manufactured items, lower-level material costs are maintained by rolling up the product structure costs.
• Labor. The cost of direct labor applied to an item. Labor cost is calculated from labor rates, setup time, and run hours at each operation of a product’s routing.
• Burden. The total variable overhead cost for an item, based on burden rates for labor and/or machines.
• Overhead. The fixed overhead cost, if any, for an item. For purchased items, overhead can be assigned to cover the expense of purchase operations, which can then be recovered as fixed overhead on all purchased items based on a percentage of their cost. Overhead cost can be maintained for each item, or by assigning it as a percentage of other cost categories.
• Subcontract. The cost of outside processing as entered in the routing operation for manufactured items.