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Adding set up cost as part of the standard cost of the item

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How can I add set up costs (labor, Overhead) for each of the machines in our production process? some machines have different set up time and number of people preparing the machine for running. We do not want to use the set up cost category in the operation as it makes the set up cost show up in price charges. We do not want to change all the BOMs to include a service item that holds the fixed cost. We want this set up cost to be included in the price of the item. So, if the standard cost of an item we produce now is $1.50/piece and the set up cost for one of the machines in our process is $10 Labor , $20 fixed overhead, and $10 Variable overhead, then we want the standard cost to show for an order of 1,000 : $1.50 + ((10+20+10)/1,000)= $1.54/piece. Thanks.

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Ludwig Reinhard Microsoft Employee on at

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RE: Adding set up cost as part of the standard cost of the item

Hello Hernan O.

Your calculated standard costs should have the set up costs included.

If the last standard cost calculation was made without the setup costs, then re-run the standard cost calculation and activate the newly calculated prices.

If you have a cost category and time set up in the route for the set up time then those costs will be included in the standard cost calculation.

Best regards,

Ludwig

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RE: Adding set up cost as part of the standard cost of the item

Hello Ludwig, thanks for the prompt reply.

- Yes, Total Labor costs in the route will be changed by the time it takes to produce the order (Time * Pay rate). If we have a 1/2 hour set up that costs $8 in labor alone, that should be fixed for the machine regardless of quantity produced. So those $8 will get diluted based on the quantity produced.

- yes, I already have a setup cost category, but the cost of the setup does not add to the standard cost of the item. it does impact the total cost produced. When we run orders that set up cost shows under Price Charges and not under the Standard Price. See below. we want the $71 to add to the standard price to make it: $262,11 and $269.59 (That $71 covers Labor, Fixed Overhead, and Variable overhead for the set up of a machine in this example).

- Yes, we evaluate items using the standard cost valuation model.

Regards,

Hernan

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Ludwig Reinhard Microsoft Employee on at

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RE: Adding set up cost as part of the standard cost of the item

Hi Hernan O.,

Labor costs are taken into consideration in the route of your item.

For routes you can set up a specific category and time that is needed for set ups e.g. of a machine.

Is that something that has already been set up for your company?

Also, can you let us know if you evaluate your items by making use of the standard costing valuation model.

Many thanks,

Ludwig

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OsmanIstanbul 2,818 on at

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RE: Adding set up cost as part of the standard cost of the item

following..

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