Ask most manufacturers what a product costs and you get the price of its materials plus a guess. The costing block rolls up material, labour and overhead through every level of the BOM, then checks that standard against what each work order actually used — so margin is a number you can defend.
Labour and overhead never make it into the product cost.
Set once in a spreadsheet, never updated after supplier prices moved.
A work order used 12% more material than planned; nobody notices until month-end looks wrong.
Your biggest account may be your least profitable once discounts and returns land.
Material, labour and overhead through every BOM level.
FIFO or weighted average, per your accounting policy.
Actual material and time recorded on the work order.
Variance per work order — price, usage, labour, yield.
By product and by customer.
When supplier prices or rates move.
Material, labour and overhead rolled up through every BOM level.
Variance per work order — material, labour and yield.
FIFO or weighted average, set to your accounting policy.
Cost for one-off and make-to-order jobs.
Which products and accounts actually make money.
Time booked on the floor costed into the work order.
Illustrative, in any currency. Materials alone suggest 4.20 — the real cost is more than double that.
| Materials from the BOM | 4.20 |
|---|---|
| Expected scrap (3%) | 0.13 |
| Labour: 6 min at 18.00 / hr | 1.80 |
| Overhead (150% of labour) | 2.70 |
| Standard cost per unit | 8.83 |
Standard cost rolled up through every BOM level, not rebuilt each quarter.
Sees which work orders ran over, and on what.
Knows the real margin before agreeing a discount.
Standard costing sets an expected cost for each product — material, labour and overhead — rolled up through its BOM and routing. Actual production costs are then compared with the standard to show variances.
Add the cost of materials from the BOM, the labour time from the routing multiplied by labour rates, and an overhead allocation — then adjust for expected scrap. A cost roll-up does this through every BOM level automatically.
It depends on your accounting policy and local rules. FIFO values stock at the most recent purchase costs; weighted average smooths price swings. Brandhubify ERP supports both.
Material prices changing, using more material than the BOM allows, slower run times than the routing, and scrap above the expected rate. Splitting a variance by type shows which one to fix.