Costs distribution of production order hours – examples

Example 1

Peg distribution on the production order:

PegQuantity
A2
B3
C5

 

Operation rates:

Type of OperationCost Rate ($)Cost Component
Labor40LB1
Overhead on Labor4LB2
Machine50MC1
Overhead on Machine10MC2

 

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 ComponentLB1LB2MC1MC2
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 OperationCost Rate ($)Cost Component
Labor40LAB
Overhead on Labor4OVH
Machine50MACH
Overhead on Machine10OVH

 

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 ComponentLABMACHOVH
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)