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Rates labor and overhead in Cost centers


If Cost centers are captured by Work Center, and work centers are captured in each operation step. So the relationship is between Op Seq - > Work Center -> Cost Center

So each sub assembly level is a Make item, with different cost centers. Labor absorption will be different as they have different cost rates. If we want to have one production order, and make phantom assemblies everything else, then we need to make a decision on which cost center labor absorption should happen at the sub level, but this could increase/reduce standard cost. My understanding is that we cannot have different cost centers (with different rates) under the same assembly. Is this correct?

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  • Posted on Aug 25 at 03:23 AM


    It depends on manufacturing process and cost allocation to work centers.

    It is possible to have multiple work centers (Assembly, Machine, Tooling, Painting) with different cost rates to capture the appropriate cost for each minute spent on the operation activity processing.

    If it is phantom assembly then it depends on business decision to add multiple cost rates or single work center with overall cost allocated.

    Best Regards,


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