I checked the part SKP-100 in the method tracker, the production hrs total to 3.59 and the set up hrs total to 7. I then divided the set up hrs by the lot size of 10, to get the set up hrs per unit which is .70. I then summed the production hrs and the setup hrs per unit and got 4.29 hrs per unit.
I multiplied the hrs per unit by the labor and burden rate or 4.29 hrs x $179.98 = $772.11. Finally, I added the material cost per unit which is $174.78 and got an expected new cost of $946.89.
However, the system calculated the new cost as $914.86. If I subtract the material cost of $174.78, I am left with $740.08 or $914.86-$174.78 = $740.08. I then divide that by the labor and burden rate of $179.98 and have a total hrs per unit of 4.11, which is different than what I expected.
In order to have this variance is seems that either the hrs per unit or the labor and burden rates are off. Could you please advise what might be causing the variance?
When you say lot size, you do mean Costing Lot Size, right? That’s what the cost roll is going to use to amortize your setup. That’s the first thing I would verify that you’re comparing apples to apples.
In addition to checking the costing lot size, I would also confirm the labor and burden rates are what you expect. In the costing workbench, there is a tab for labor rates and a tab for burden rates where you can see the rates Epicor is using for the roll-up. Labor and Burden rates can be different for production and setup.
This sounds like a good idea too. From your description, it sounds like you’re using a single rate for labor and burden in your manual calculations. Are all of your Labor and Burden rates the same across all Resources?
I checked the labor and burden tabs in the costing workbench. Since the rates match, it seems then that the variance is in the hrs per unit. May I know why there is a variance in the hrs per unit?
It seems then that the variance is in the hrs per unit.
I am calculating the hrs per unit by dividing the set up hrs by the costing lot size, this gave me .7 set up hrs per unit. I then add the production hrs per unit and the set up hrs per unit and get 4.29 hrs per unit or 3.59 production hrs per unit plus .7 set up hrs per unit.
When I check this against the cost roll hrs per unit of 4.11, there is a variance and I am not sure why. Could you please advise why there is a variance in the hrs per unit?
For reference, I calculated the cost roll hrs per unit by subtracting the material cost from the new cost amount (which would tell me the labor and burden portion of the cost) so, $914.86-$174.78 = $740.08. $740.08 is the labor and burden portion of the cost. Finally, I divide this by $179.98, which is our combined labor and burden rate and get 4.11 hrs per unit.