Examples of subcontracting rates
The following data is used in the examples:
| Subcontracting rate | $50 |
| Subcontracting factor | 1.0 |
| Gross output | 170 |
| Labor hours run | Gross output * cycle time (hrs) = 170 * 0.1 = 17 |
| Machine hours run | Gross output * cycle time (hrs) = 170 * 0.1 = 17 |
| Labor hours setup | Setup time (hrs) = 2 |
| Machine hours setup | Setup time (hrs) = 2 |
Unit
Subcontracting costs = gross output * subcontracting rate = 170 * 50 = $8,500.
Hour
Subcontracting costs = (machine hour setup + machine hours run) * subcontracting rate = (2 + 17) * 50 = $950.