Costs distribution of production order hours – examples
Project peg distribution is used to split production order hours across relevant project pegs, taking into account the quantity of each peg.
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) |