Actual cost, variances and the cost sheet
When a production order is done, its actual cost is worked out and set against the standard cost. It uses the material really used, the machine and labour time really spent and any job charges. The variances show per order and in a monthly report by item.
PLANSFrom Growth
The problem it solves
- You find out an item lost money only when the year's accounts are closed.
- Material used on the floor is more than the BOM says, and nobody knows on which orders.
- Jobs run longer than planned, but the extra hours never reach the item's cost.
- The cost sheet shows what an item should cost, and nobody checks it against what it did cost.
How it works
- Put a standard cost in use for your items with the Cost Roll-up (see Standard cost roll-up from the BOM).
- Run production as usual. Components are picked and used, jobs are timed on the terminal, and rejects scrapped at the terminal use up their share of components.
- When the order is done, its Cost tab fills by itself. It shows actual material, actual machine and labour, job charges and the actual cost, against the standard for the quantity made.
- The variances show in red when the order cost more than standard and in green when it cost less: material, labour and total.
- Open Manufacturing > Reporting > Cost Variances for every finished order by item and month: standard cost, actual cost and total variance. Open a cell to see its orders.
- Print the Cost Sheet from the item: it ends with the actual cost per unit over the last 10 finished orders, next to the standard.
Everything it does
Actual cost of an order
- Actual Material: the stock value of the components used, including components scrapped with rejects
- Actual Machine and Labour: each job's minutes at the job's or the machine's cost per hour
- Job Charges: the order's extra cost per unit times the quantity made
- Actual Cost: the three added together
- Worked out when the order's stock is posted, and kept on the order
Variances
- Standard Cost: the standard in use times the quantity made
- Material Variance: actual material less standard material
- Labour Variance: actual machine and labour plus job charges, less standard machine and labour plus factory overhead
- Total Variance: actual cost less standard cost
- Over standard shows in red, under in green; with no standard in use, variances stay at zero
Reports
- Cost Variances: finished orders as a pivot, items down and months across, with standard cost, actual cost and total variance; also as a list
- The order's Cost tab, shown once the order is done
- Cost Sheet: the actual cost per unit over the last 10 finished orders of the item
- Work in Progress and stock by stage are separate reports
Who uses it
Production ManagerReads the Cost tab and the Cost Variances report, and acts on orders over standard.
PlannerKeeps BOMs and steps right so that the standard matches the work.
SupervisorTimes jobs and records rejects on the terminal, which feed the actual cost; does not see the costs.
Where you use it
- Web: the production order's Cost tab, once done
- Web: Manufacturing > Reporting > Cost Variances
- Web: Print > Cost Sheet on the item
- Not in the SmartMy Manufacturing app
What you control
Settings
- Factory Overhead: 10 %, in the standard cost (Settings > Manufacturing)
- Rejects Use Up Material: on to start with, so scrapped rejects reach the order's material cost
- Per machine: its cost per hour
Questions
When is the actual cost worked out?
When the production order is done and its stock is posted. It is kept on the order and does not change afterwards.Does rejected material count?
Yes, when Rejects Use Up Material is on (the default). Rejects scrapped at the terminal scrap their share of the components, and that value is in the order's actual material.Where does labour cost come from?
From the minutes each job ran, at the cost per hour of the job or its machine. Operators' piece earnings are not added to the order's cost.What if an item has no standard cost?
The actual cost is still worked out, but the variances stay at zero. Run the Cost Roll-up first.Who sees the variances?
Production Managers. The Cost tab and the Cost Variances report are hidden from supervisors and operators.Related features
PLANNING, QUALITY AND COSTStandard cost roll-up from the BOMWork out what each item you make should cost, rolled up level by level. It counts its components, machine and labour time from the bill of materials, and your factory overhead. Keep each standard from a date, and print a cost sheet with office overhead, profit and a suggested price.SHOP FLOORWork in progress value and the cost of rejectsEach open production order shows what is tied up in it. That is components picked so far at cost, and machine and labour time booked at the machines' cost per hour. The WIP list adds them up for the month end, and each order shows the value lost in rejects and scrap.PLANNING, QUALITY AND COSTProduction reports: plan against actual, material against BOM, scrap by reasonThree ready reports for the production manager. What was planned and what was made, by item and month. The material planned and used on orders. What was scrapped, by reason. Each opens as a pivot you can turn, filter and export.SHOP FLOORThe shop floor terminal: a tablet at each machineA tablet at each machine or station shows its jobs in big tiles. Operators sign in with a PIN or badge, and start and pause jobs. They count good and rejected pieces with a reason, and stop the machine with a reason. Every count goes straight into the order.PRODUCTION AND JOB WORKStock value by stage: raw, made, at job workers, on hold, rejectedSee what your stock is worth as on any date, split by stage. The stages are raw material, made items, material at job workers, quality hold and rejects, and with Growth work in progress. Per plant, item by item, with each item's costing method.
See your shop floor on it.
Tell us what you make, how many machines and people you run, and how production is recorded today. We will set up a line with you and run a job on the terminal.