P R O D U C T C O S T

Transcription

1 P R O D U C T C O S T The cost of producing a product is more than just the ingredients. And even how the ingredients are valued can vary depending on accounting practice for the particular company. The Average Cost on a product (or MUI/PIP) comes from the recipe structure adding up the ingredients, labour and overheads. This document defines where these values come from and where the options can be set. Cost on finished product comes from the recipe, and is for the finished unit In this case the units are each and the recipe is for 1, so cost is total recipe cost. If the units were KG, the product would show the Cost/Kg, etc. Similarly for Mui/Pip ALB AKE.COM DE C 13 P AG E 1

2 RECIPE COSTING The current product costs are assigned as the cost price when orders are created, and can be used, combined with sale price, to measure of the profitability of a particular sale, or group of sales. Recipe cost is made up of a number of elements which lead to a final cost. These are explored below under Ingredients, Labour and Overheads. Note that this is the batch cost on the recipe; the cost shown on the product the recipe makes, is per unit (total/yield). Mui and Pip come in as Other, but show in the expanded section as the components that make them up. This is from a recipe that has a PIP and packaging, the PIP cost is made up of Ing, Lab and O/H. The overhead is calculated on the direct ingredient / labour, not expanded, avoiding multiple applications of the overhead. ALB AKE.COM DE C 13 P AG E 2

3 I N G R E D I E N T C O S T S Ingredient costs are based on the amount of the ingredient that is included on each recipe line. This amount includes both the quantity used in the recipe and any wastage that is also on the line. Note that moisture loss and batch adjustment on a recipe does not affect the costs although they obviously reduce the yield. Here units of Cocoa are included at $8/Kg giving line cost of I N G R E D I E N T See help document Products/AddingANewIngredient for ingredient setup ALB AKE.COM DE C 13 P AG E 3

4 Cost Type - On the ingredient is where the type of ingredient is selected (Green above), and then shows in the appropriate section of the costings on the recipe. Cost - The cost is per Use In unit on the recipe, in this case the costs are for the stock in unit of 10Kg, but used in Kg. Also all options are the same ($80/10Kg), Standard, Average and Last cost. C O M P A N Y D E T A I L S Cost Basis - The cost basis that is to be used is set on Company Details, on the Baker Constants II tab. ALB AKE.COM DE C 13 P AG E 4

5 Average cost is a calculation of the quantity on-hand divided by the value on-hand to give a unit cost. The Last cost is the last purchase (or transfer value) of the item. Finally Standard cost is set on the ingredient, manually or by updating when purchasing the item. L A B O U R Minutes - The labour to apply is driven from two fields on the recipe that can be seen in the below image - Fixed Man Minutes and Var. Man Minutes. The Fixed Man Minutes field indicates number of minutes required to setup for the production of this recipe without reference to the quantity being produced. Var. Man Minutes is the number of man minutes used to produce the batch size. However for costing purposes the labour is based on one batch, so the two fields are simply added together to give man minutes for costing. Note that these timing should be what is required ONLY for this recipe it does not need to include the time taken for sub-recipes. D E P A R T M E N T Rate - The rate that should be charged for the labour component of the costing is taken from the department on the recipe. The Avg $/Hr field is used to calculate the labour costs for recipe production. ALB AKE.COM DE C 13 P AG E 5

6 Since the actual labour required depends on the number of batches being produced the calculation of labour cost is based on the average dollars per hour times the total of fixed plus variable minutes divided by 60. ((1+.5)*14/60=.35) O V E R H E A D S Overheads is the method of distributing the overhead, or running costs, of a facility across the products. On the recipe the Leverage ratio can be set to adjust for variations in overhead, such as use of expensive equipment or power hungry processes, which alter the actual overhead cost relative to other product produced. O/H = O.H.% * Leverage Ratio * included cost The ratio and included costs are on company details. C O M P A N Y D E T A I L S System wide settings for the overhead ratio, and costs to include in the ratio, are found on Company details on the Constants tab. Recipe OH% - This is the percentage of cost to add as overhead. ALB AKE.COM DE C 13 P AG E 6

7 The overhead is the set percentage of the selected value, as follows: - % of Est Price - This uses the estimated price set on the recipe. - % of Ing. Cost - This uses the ingredient cost, this includes the Ing, Pkg, Oth costs as they are all ingredients. - % (Ing.+Lab) Cst As above plus the labour cost (defined below). - % of Lab Cst - This Uses the labour cost as found on the recipe. - $ per weight unit - only applies to the finished products since it could otherwise be charged multiple times in the recipe hierarchy. In this case the overhead is based on the weight of the finished product (in the system wide weight measure) times the entered amount. For this basis the entered amount is a financial figure rather than a percentage. This is difficult to calculate accurately in advance, but at the end of a period the total calculated overhead can be compared to actual overhead for that period. This is intended to include items such as power, rent, financing costs, management salaries, etc. ALB AKE.COM DE C 13 P AG E 7

8 C O S T I N G R E P O R T In order to identify the makeup of the cost, the recipe can be printed with costs on it. From a product, finished or Mui/Pip, click on the Recipe button. This will show the recipe tree. Note that you can expand the elements by clicking the plus signs next to the recipes. Double clicking on any line will take you to that item. If you click the Print button, without checking the No Costs checkbox, then you will get a listing of the components with costs as per the below image. This shows how the cost elements have been calculated and applied to the item. ALB AKE.COM DE C 13 P AG E 8

9 That is with Print Summary and Show Cost Each selected. There are also options for how many decimal places to display the Qty to, full report or summary, show flour or batch weight percentage, or include cost per unit. The full report with Batch Weight percentage follows. ALB AKE.COM DE C 13 P AG E 9