Overview | Job Costing & Productivity Measurement

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M-Power has a set of procedures and tools that when used together allow a company to see how each job they complete contributes to the companies profit. Productivity is also tightly tied into job costing and is discussed here also.

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Inputs to Job Costing

The profit of a job is calculated within m-power using the following inputs

  • Sales Revenue
    The sales figure comes from the invoiced sales that are assigned to the job.
      • The invoiced sales figure comes from the sum of the individual invoice lines and NOT the sum of the invoice.
      • The job # is assigned to an invoice line automatically when the job is despatched, or converted to an invoice but might not be assigned if the invoice was entered manually
      • All invoice figures are 'Ex-GST'

  • Material Costs
    The material costs used are those that have been 'committed' to the job.
      • Committing the material to the job can be done automatically at the start of the job and then any variances to these estimates can be corrected at the end of the job in the job review area.
      • Alternatively, the materials used can be scanned in from the shop floor as they are used.
      • The cost of material is calculated exclusive of markup. 
      • Your figures may be skewed if you have entered a 'sell price' for material in the master material list which already includes a hidden markup

  • Labour Costs
    Labour costs are calculated from the labour time that has been scanned or recorded into the job.
      • The 'cost' of labour is viewed differently by different companies. If you believe that the 'cost' of labour is different to what you charge for labour in a quotation (your factory charge-out rate) then enter your cost figure in the 'Standard Cost' field of the process.

Job Costing Workflow

The following is the workflow that ensures that the job costing elements are recorded

 

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Committing Materials

The material list and quantities that are shown on the job card and quotation are the estimated quantities required for the job

When we 'commit' these materials to the job we are transferring them from an estimated to actual usage. In doing so the system will consider them to be consumed. The 'consumed' quantities are used in the job costing calculation rather than the estimated values.

We recommend that committing materials happens at the start of the job because this means that the materials are not showing as available to other jobs (if you are managing inventory)

M-Power staff can configure your system so that the materials are removed automatically when you press the 'job release' button. 

Alternatively, material usage can be recorded in the following ways

  • in the MIS system, by reviewing the list of materials and pressing the 'commit' button
  • Scanning the materials as they are used within the factory

Scanning Time

Recording time for job costing purposes is achieved by staff scanning a start and end time for each process that they work on. This can be done:

  • On the Factory Floor | by scanning process barcode off the job card at the start and end of the process
  • From a Computer |  by pressing the start and end buttons for a process on your schedule or in WIP
  • From a mobile device | by pressing the start and end buttons on your mobile schedule
  • Manually | by entering a manual time record from the 'Me' section of the job card

 

REVIEWING THE JOB

Reviewing the job is a process of comparing actual with estimated times and material usage and accounting for variances. These variances might be the result of errors at the estimating or job planning stages or they might be errors of workmanship. Either way, the purpose of job review is to identify and resolve issues that may impact future job profitability

In doing so, accept that there is a natural variance in the profitability of jobs over time. It is more important to look for patterns in the profitability of work that can be attributed to consistent over or underestimation of time or material requirements. While not available in Aspire, the Non-Conformance Reports in M-Power MIS are useful to record and track these patterns.

 

Sources of Variance

The following might be sources of variances in the job cost calculation

 

Missing Materials A staff member notes on the jobcard that material was needed for the job but was not listed on the jobcard 
  • Add the material to the job costing
  • Add the material to the job
  • Consider adding to the master recipe on which the product recipes was based
Missing Labour Some processes listed in the job do not have time scanned against them
  • Determine if the process was needed - if not, then delete from the job and associated recipe
  • Consider if the time was included in another process and not scanned separately - if so, disregard as the aggregate of time is more important than the sum of time

 

Small Material Variances Materials actually consumed are different from the estimated values copied in at job release
  • correct the materials in the job cost area so they reflected actual use
Scanning Errors A staff member has forgotten to scan off a process - 
  • edit the time to the best estimate of their end time
Large Variances | Estimated to Actual You see large variations in actual time or materials to their estimated
  • Investigate and determine if a variance actually occurred or whether the data is poor.
  • Raise a non-conformance report (MIS) if it is related to re-work
  • Change the master recipe if the error happened in the estimating stage

 

Job Scanning Errors

Scanning errors are common when companies first begin scanning time. Staff forget to scan off between processes or scan off at all at the end of the day. 

To ensure better data for job costing purposes we can configure the system to copy across the estimated time for the unscanned time when the job is closed. Be mindful that perhaps the unscanned time has been included in another process and not separated - in this case, deleted the 'autoscanning' time manually in the job costing error

Regardless of the accuracy of this data, the auto-scanned time does still give valuable productivity insights in aggregate even if personal productivity data is compromised.

 

 

 



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