Actual man-hours and standard man-hours
To calculate direct labor costs by product in the cost management system, it seems reasonable to prorate direct labor costs by cost center or semi-gross direct labor costs by product group aggregated from the accounting system with direct work hours as an allocation ratio, but there is a problem of how to get direct work hours by product. I don't think it's fair to ignore the fact that the time and effort involved in each product is different and the actual manufacturing quantity is prorated.
If the direct work hours are accurately entered for each product in the work diary, it is only necessary to aggregate the data at the end of the month. However, since indirect work and leaving the site are interspersed between the direct work, it may be a little difficult to accurately obtain only the actual occurrence time of the direct work for each item in the daily report base. It might be possible if there is a system where Start-End can be easily entered with a field terminal or touch panel.
In the Japanese manufacturing industry in Indonesia, I think it is only the factory that advanced IT considerably that is systematized to this direct work time aggregation in Indonesia, but I think there are two main ways to aggregate the direct work time as follows. The point is the difference between calculating from the front and from the back.
Enter the start and end times directly from the field terminal and total them.
Since the start time and end time of production for each product are recorded, direct working hours for each item can be obtained on a daily report basis just by tabulating them at the end of the month.
Indirect work hours and non-working hours are deducted from attendance data
The criteria for prorating the direct work hours aggregated in the cost center by product should take into account the "labor gap per product" and the actual manufacturing volume described above. The standard man-hours (how many minutes per piece it takes as a standard) is an indicator of the time and effort required for each product.
- Standard man-hours x actual production quantity
Whether you use a system to calculate the production cost by product or a manual calculation in Excel, it is essential to calculate the direct working hours by product in advance.
- Direct work hours by product = total direct work hours x {(standard man-hours x actual manufacturing quantity)/SUM (standard man-hours x actual manufacturing quantity)}
The direct labor cost by product is calculated by multiplying the calculated direct work hours by the wage rate (cost per hour), and this wage rate is calculated for each cost center or product group as follows
- Total wages ÷ Total direct work hours = direct labor cost wage rate
At this point, the direct labor cost, which is a cost element by product, is finally calculated.
- Direct working hours by product x wage rate = direct labor costs by product
The direct labor cost per product can be obtained by multiplying the actual number of man-hours (how many minutes per product it actually took), which is the direct working hours for each product divided by the manufacturing quantity, by the rate of pay. Work hours are usually in minutes, and the wage rate is in hours, so the units need to be added together.
- Actual man-hours x wage rate = direct labor costs per piece
Actual and standard wage rates
SALARY is a monthly salary and is a fixed cost, while WAGES is a wage for hours worked, such as overtime, and is a variable cost. I am ashamed to say that I only recently learned of this difference.
The rate of pay is like the hourly rate of a part-time job, and just as the hourly rate is fixed as a contract at the time of the interview, and is constant whether you take a break from the one-op or sit on the toilet seat and take a smoke while cleaning the toilet, it is common to use the standard (scheduled) rate of pay.
The wage rate when using the cost control system is the actual wage rate that will be obtained after the calculation and the wage rate when calculating manually in Excel will be the standard wage rate that will be prepared in advance for the direct labor cost calculation.
The actual amount of money you receive is the same whether you're busy doing one-op or skipping work in the bathroom, but for your employer, the more you skip work, the higher your wage rate will go. Therefore, instead of having a fixed salary for part-time workers, we need to update the appraisals once a year according to performance, which will lead to a sense of unfairness and lower morale in the field.