Costs distribution of production order hours – examples

Example 1

Peg distribution on the production order:

Peg	Quantity
A	2
B	3
C	5

Operation rates:

Type of Operation	Cost Rate ($)	Cost Component
Labor	40	LB1
Overhead on Labor	4	LB2
Machine	50	MC1
Overhead on Machine	10	MC2

If, for this production order, 20 man hours and 10 machine hours are entered when these hours are processed, costs and hours are retrieved per peg and cost component:

Cost Component	LB1	LB2	MC1	MC2
Peg
A	$160 (4h)	$16 (4h)	$100 (2h)	$20 (2h)
B	$240 (6h)	$24 (6h)	$150 (3h)	$30 (3h)
C	$400 (10h)	$40 (10h)	$250 (5h)	$50 (5h)

Example 2

If different types of operation have the same cost component, costs and hours are aggregated.

Operation rates:

Type of Operation	Cost Rate ($)	Cost Component
Labor	40	LAB
Overhead on Labor	4	OVH
Machine	50	MACH
Overhead on Machine	10	OVH

If, for this production order, 20 man hours and 10 machine hours are entered when these hours are processed, costs and hours are retrieved per peg and cost component:

Cost Component	LAB	MACH	OVH
Peg
A	$160 (4h)	$100 (2h)	$36 (4+2=6h)
B	$240 (6h)	$150 (3h)	$54 (6+3=9h)
C	$400 (10h)	$250 (5h)	$90 (10+5=15h)