Product costs are the sum of
their elemental costs. Cost elements are defined as follows:
(a)
Material
(b)
Material
Overhead
(c)
Resource
(d)
Overhead
(e)
Outside Processing
Material - The raw
material/component cost at the lowest level of the bill of material determined
from the unit cost of the component item.
Material Overhead –
(a) The
overhead cost of material, calculated as a percentage of the total cost, or as
a fixed charge per item, lot, or activity.
(b) You
can use material overhead for any costs attributed to direct material costs.
(c) If
you use Work in Process, then you can also apply material overhead at the
assembly level using a variety of allocation charge methods.
Resource –
(a) Direct
costs, such as people (labor), machines, space, or miscellaneous charges,
required to manufacture products.
(b) Resources
can be calculated as the standard resource rate times the standard units on the
routing, per operation, or as a fixed charge per item or lot passing through an
operation.
Overhead –
(a) The
overhead cost of resource and outside processing, calculated as a percentage of
the resource or outside processing cost, as a fixed amount per resource unit,
or as a fixed charge per item or lot passing through an operation.
(b) Overhead
is used as a means to allocate department costs or activities. For example, you
can define multiple overhead subelements to cover both fixed and variable
overhead, each with its own rate.
(c) You
can assign multiple overhead subelements to a single department, and vice
versa.
Outside Processing –
(a) This
is the cost of outside processing purchased from a supplier.
(b) Outside
processing may be a fixed charge per item or lot processed, a fixed amount per
outside processing resource unit, or the standard resource rate times the
standard units on the routing operation.
(c) To
implement outside processing costs, you must define a routing operation, and
use an outside processing resource.
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