Activities Allocation
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Activities Are Allocated from the Production Cost Center to the Production Order The production cost center supplies value-added resources, such as labor and machine time, to the production order. These resources are represented by system activities, such as labor hours and machine hours, and each activity has a planned rate. The resources (activities) used to produce the finished goods are posted to the production order. The quantity of each activity is multiplied by its planned activity rate. The system expects a standard number of hours to be confirmed, which is based on the quantity of finished goods to be produced by the production order and the routing used in this order. For this production order, because confirmation occurs manually at the operation level and not through backflushing, the standard number of hours that default from each operation in the routing can be updated to reflect actual hours. This example assumes that setup time is posted to the production order for period 1, but no additional setup is required in period 2. Setup time is assumed to be labor time. Labor and machine times are posted to the production order for both open periods. The following list assumes that setup, labor, and machine times are posted to the production order for both open periods: • Setup labor hours are allocated from the production cost center to the production order
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Activities Allocation
Transcript of Activities Allocation
Activities Are Allocated from the Production Cost Center to the Production OrderThe production cost center supplies value-added resources, such as labor and machine time, to theproduction order. These resources are represented by system activities, such as labor hours and machinehours, and each activity has a planned rate. The resources (activities) used to produce the finished goodsare posted to the production order. The quantity of each activity is multiplied by its planned activity rate.The system expects a standard number of hours to be confirmed, which is based on the quantity of finishedgoods to be produced by the production order and the routing used in this order.For this production order, because confirmation occurs manually at the operation level and not throughbackflushing, the standard number of hours that default from each operation in the routing can be updatedto reflect actual hours. This example assumes that setup time is posted to the production order for period 1,but no additional setup is required in period 2. Setup time is assumed to be labor time. Labor and machinetimes are posted to the production order for both open periods.The following list assumes that setup, labor, and machine times are posted to the production order for bothopen periods: Setup labor hours are allocated from the production cost center to the production orderThe standard setup time is developed for a lot size, so it is spread over the entire quantity of finishedproducts that are manufactured with the production order. If there are lot size fluctuations, comparedto the lot size used to develop the standard cost, the standard setup time still does not change. (Weassume that setup is unrelated to the lot size.) In this example, setup time is assumed to be labor hours. Labor hours are allocated from the production cost center to the production orderThe standard number of labor hours is developed on a per-unit basis, so the standard hours requiredfor one unit is multiplied by the number of units produced in the production order. Machine hours are allocated from the production cost center to the production orderThe standard number of machine hours is developed on a per-unit basis, so the standard hoursrequired for one unit is multiplied by the number of units produced in the production order.
