USA Cost standard hours / standard cost update


JR.

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I am searching for best practices in regards to standard costing rate updates and more specifically material overhead, labor, and mfg overhead.

In our current model, we are isolating each cost pool and diving by cost standard hours. Cost standard hours are currently calculated at 41,600 (52 weeks x 40 hours x 25 Headcount x 80%). 80% represents an estimated actual working hours minus breakage.

The calculation above appears to be more favorable then calculating Cost standard hours (earned hours) by volume (qty of units x standard labor per unit) due to suspected BOM/standard labor inaccuracies.

I am just curious how other factories/manufacturers calculate rates. Are others using cost standard hours? What is in the denominator/numerator?
 
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JR.

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Thanks. I will look into ABC.

I have a question regarding refurbishment expenses, overhead to process returns and warranty replacements, and overhead for quality checks: are these expense generally included in overhead rates?

For refurbished product, there are no standard costs, but this is a large cost driver, so I think ABC might be useful here.
 

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