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Former Member
Apr 14, 2014 at 08:01 PM

How do add additional inspection cost per hour or per unit to standard cost?

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Hello,

Here is the scenario.

Let's assume for the sake of simplicity that a plant makes only two SKUs A and B.

Current Cost structure would be as under:

1) Raw material cost

2) Variable overhead (Rate per hour as per routing)

3) Fixed overhead (Rate per hour as per routing)

4) Total plant administrative overhead (Rate per hour based on total hours for the plant)

Total standard cost = Sum of (1) to (4)

Let's say we want to eliminate step 4 and blend it with step 3 as much as possible and make it routing driven.

Let's say total plant overhead in step 4 includes some administrative costs pertaining to inspection which I want to absorb only into SKU A only.

What is the best way to do this?

1)Add an additional operation to the routing of SKU A to somehow capture this cost

2)Maintain a different fixed overhead rate for SKU A using a different planning version which is attached to a different costing variant which will be used only for costing A . Also use a different production order type for SKU A which is attached to a new costing variant attached to a new planning version

3) Add a percentage overhead representing inspection costs. To be done using a new costing sheet attached to a new costing variant which will be used only for costing A . Also use a different production order type for SKU A which is attached to a new costing variant which carries the new costing sheet