I have a BOM item (PRD01) which is consisted of "PART01" and "PART02", one of the operations in the route has "Setup cost" configured.
I get the following costing sheet when i roll-up the cost for the BOM item.
The hourly cost rate for the "Setup" is 52 and it takes 3 hours, so the COGM-L2 above is" 3 * 52 = 156.
I have a production order which produce three pieces of this item. when i estimate the production order i got the costing sheet as below:
The total "Setup" cost is divided to three pieces, each is: 156 / 3 = 52.
So i get the variances like below when i end the production order.
From my point of view, the variance is from: (156 - 52) * 3 = 312.
Anyway, no matter i involve the "Setup" cost in the costing sheet or not, there will be always a variance between the estimated cost to the real cost. cause no body knows how many we will produce. and the setup cost is always changing based on the actual number we produced.
So what's the best practice for involve the "Setup" cost ?
Thanks.