Costing style change

costs
• Direct labour costs
- make up pay
- learning allowances
- other off standard
• Cost of “lost” sms/sams
- charge out rate
• Cost of rejects
- cost of quality
 Direct labour
• Company policies
– Difference between Guaranteed minimum salary
& reduced incentive payments earned.
– Difference between “average” earnings & reduced
incentive payments earned.
– Learning allowances. % of incentive earnings
added for compensation for learning
– m/c?
 LABOUR COST CONTROL - SALARY

Section off std time

On Emplo Emplo Contra Attend Over Opera Output smv Smvs On std No m/c Re- others Total On Off Over Make Earned Total Util Excess
Std yee yee ct ed time tion on std Earned work break train Off Std Std Time Up Off pay Isation Cost
perf number name time time on std pay std time pay pay pay Std % %
pay
90 1234 Jeevani 480 480 0 o/lock1 500 0.60 380 190 0 60 0 0 60 420 15 0 0 0 205 88 7.3%
o/lock3 200 0.40

87 1345 Pushpa 480 420 0 collar 520 0.80 416 208 20 0 0 0 20 400 10 0 0 0 218 96 5%
make

44 1635 Mangal 480 480 0 collar 350 0.60 210 105 0 0 0 0 30 450 0 0 15 0 120 100 12.5%
ika top
sew

0 1710 480 480 0 collar 0 1.10 0 0 0 30 450 0 0 0 15 0 28 (1.10x 120 0 29%

Doreen stand 140sms
)
= 34%
77

83 Totals 1920 1860 0 1570 1006 503 20 90 450 0 110 1270 40 0 43 663 67% 6%
77
 Cost of lost SAMs
• SAMs produced by line/team/section
compared to budgeted output level
• 20 operator team budgeted to work @ 75% on
8 hour day.
• SAMs budgeted = 20*480= 9600*75% =7200 .
 SAMs budgeted daily 7200
• Day 1 = 30% SAMs produced 2880
• Day 2 = 40% SAMs produced 3840
• Day 3 = 55% SAMs produced 5280
• Day 4 = 65% SAMs produced 6240
• Day 5 = 70% SAMs produced 6720
• Day 6 = 75% SAMs produced 7200
• Total SAMs = 32160
• Budgeted = 6 *7200 = 43200
• Actual = 32160
• Loss = 11040
 “Charge out” rate
• Cost of direct SAM = 2 rupees
• Cost of overhead = 8 rupees
• Charge out rate = 10 rupees per SAM

• Loss * charge out rate

• 11040 * 10 rupees = 110,400 rupees
 Quality costs
• Cost of failure
– Repairs
– Rejects

• No need to identify; should be measured as part

of management process
 Reduce costs
• PREPARATION, PREPARATION, PREPARATION
• Pre production
– Specifications
– Methods (SOPs)
– Machines
– Pre- production run

• IE
• Training
• Technical
 Reduce costs
• Step by step – OPERATIONS
• Implement
• Monitor
• correct