Jun
30
Written by:
Vitullo
6/30/2010 11:38 AM
Did you know that you can copy work centers into a Cost Simulation cost set in the Cost Management Menu? Why would you do this? Generally, companies update their standard costs on an annual basis. The cost components of a manufactured item’s cost include:
· The product structure.
· The routing run time.
· A subcontract cost for a routing operation.
· Work center associated with a routing operation.
· Work center rates for labor and burden.
Of all these components, work center rates will typically change year over year. These changes occur as a result of the direct labor resources associated with those work centers. These direct labor employees will obtain raises, retire or new hires will start working in those work centers. Using cost simulation, you can begin changing your cost assumptions months before you need to deploy the new standards.
You will be able to generally predict what next year’s labor cost will be. So the effort for the cost simulation is as follows:
· Copy your production work centers into your cost simulation cost set.
· Update the rates in the simulation work centers.
· Roll the routings.
Performing this effort, months before deploying your new standards, will provide time for good analysis of changes in cost instead of waiting till year end to perform the mechanical roll-up.
For more information regarding this content, contact avitullo@logan-consulting.com