Labor
The following example depicts the setup labor cost calculation. Setup time includes changing or refitting a work center or a piece of equipment to produce a new item, while setup costs include scrap, calibration, downtime, and lost sales associated with preparing a resource for the next item.
Total consumed setup hours = total actual setup hours
Setup rate = total setup cost / total consumed setup hours
Unit setup labor cost = setup rate * the item consumed setup hours / this period total quantity of the item
The following depicts run labor cost calculations:
Total consumed run hours = total actual run hours
Run rate = total run cost / total consumed run hours
The unit run labor cost = run rate * the item consumed run hours / this period total quantity of the item