Accurate Job Costing

A major problem for many manufacturers is that they do not produce accurate cost estimates for jobs and as a result often under or over bid jobs. Even worse, many manufacturers do not know what each job costs as it is shipped, nor do they have a detailed breakdown of estimated versus actual costs.

As a result they often lose money on repeat orders, when they could have the data to prepare accurate cost estimates and present quotations on which they can make money and win jobs. Manufacturers often make 80% of their profits on 20% of their jobs and then throw it all away on the other 80% of the jobs.

This problem is exacerbated by increasing levels of automation on the factory floor where machines and people work on multiple jobs at the same time. This requires that materials, labor, and machine time costs have to be allocated to multiple jobs that may be cycled on and off a shared machine or other piece of equipment.

The BellHawk software computes actual costs based upon:

• Actual labor used at loaded labor rates for each person, as allocated between different jobs
• Actual material used, at purchased or made cost or standard cost, including scrap and wastage
• Actual machine time used as well as setup, tear-down, and any down-time incurred at loaded cost per hour rates for the machine
• Actual operations performed including rework.

This cost data can be exported to an ERP or accounting system and/or it can be used to assign actual costs to individually tracked containers of products. These can then be tracked when shipped to customers, enabling a comparison of sales price versus actual cost for customer orders.

In addition, BellHawk generates a set of reports that enable managers to compare what products actually cost versus what they were expected to cost. These reports are:

• Estimate of costs, showing a breakdown by operations of labor, material, and machine times and costs for the quantity to be made. This is based on the BOM and route and required materials at standard cost for the products to be made.
• Actual costs, showing a complete breakdown by operation of labor, material, and machine times and costs.
• Comparison of planned versus actual cost, including the effect of unscheduled operations and use of alternate resources.

In computing the costs, BellHawk handles:

1. Allocation of labor between different jobs being worked on simultaneously
2. Multiple jobs run on a machine as a group at the same time
3. Materials consumed at the same time to produce a set of different products in a common operation
4. Production of byproducts that have residual value

In handling its costing activities, BellHawk automatically takes into account customer owned materials and does not include these in costs. But it does include the cost of labor and machine time and other supplies in processing these customer owned materials.

BellHawk also has the capability to roll up costs over multiple work orders that make up a complex project so as to give real-time visibility of project costs.

Please click here to learn more about the "Application of BellHawk to Engineer-to-Order Projects."