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Dynamics 365 Community / Forums / Microsoft Dynamics NAV (Archived) / Direct Labor and overh...
Microsoft Dynamics NAV (Archived)

Direct Labor and overhead costing

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Posted on by babubaskaran@outloo... 6

Dear All,

I thought will post a new question since no one looks at verified question :-).  I found that the direct labor rate is entered on the work center as direct unit cost, indirect cost and overhead rate.  This is entered as rate and percentage.  However I am not sure how the entry will get posted.  i.e. 

for a production order 12345 following is the labor hours entered

10 hours - Rate 25 - direct labor and 102% is indirect and overhead rate is 40

so amount will be as follows

Direct - 250

indirect - 300

and overhead - 400

what will be the entry for this on general ledger.  The indirect and overhead is estimated rate, but actual might be different how to match the actual indirect and overhead with this.

*This post is locked for comments

  • Suggested answer
    Community Member Profile Picture
    Community Member on at
    RE: Direct Labor and overhead costing

    This depends on the Unit Cost Calculation Field at Work Center (Time or Per Unit).

    Let's say it is time and "Unit of Measure Code" is Hour for this work center.

    Now, let us create new Routing and select this particular work center on routing lines

    > Select the appropriate Run Time or Setup Time on Routing lines.

    > This will get populated on Released Production Order

    > You may change the run time as actual.

    > Once you enter the actual run time (in Hour), system will calculate the actual cost and would post the entries accordingly as per below formulas.

    > Direct Unit Cost: Run Time (In Hour) * Direct Unit Cost (Defined @ Work Center)

    > In Direct Cost: Direct Unit Cost % In Direct Cost %

    > Overhead Cost: Run Time (In Hour) & Overhead Rate

    So Unit Cost per Item would become - "Direct Unit Cost + (Direct Unit Cost x Indirect Cost %) + Overhead Rate"

    Hope this helps.

  • Suggested answer
    Alex Chow Profile Picture
    Alex Chow 4,481 on at
    RE: Direct Labor and overhead costing

    For manufacturing, you're correct in that the indirect cost and the overhead are only estimates. These are the standard cost that are applied to each item that's to be accrued into your inventory value when the items are produced.

    When the actual costs come in, the difference between the indirect cost/overhead cost and the actual cost will be your variance.

  • Suggested answer
    Alexander Ermakov Profile Picture
    Alexander Ermakov 28,094 on at
    RE: Direct Labor and overhead costing

    The calculation for the posting will be as follows:

    Unit Cost = Direct Unit Cost + (Direct Unit Cost x Indirect Cost %) + Overhead Rate

    Get more info here: msdn.microsoft.com/.../hh172847(v=nav.90).aspx

    Hope this helps

  • babubaskaran@outlook.com Profile Picture
    babubaskaran@outloo... 6 on at
    RE: Direct Labor and overhead costing

    Hi All,

    Any NAV Manufacturing expertise who can help me with my question or someone from Microsoft.   Thanks in advance.

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