Implementing Manufacturing and Materials Management: From Empty Plant to Costed Work Order · Module 16 · Cost Planning
What a standard cost is made of
Lesson 163 of 188 · 2 min
The build-up. Purchased material cost, plus resource cost from the work definition, plus absorbed overhead — rolled up through every level of the structure. Where each number comes from. Material is entered, or from the last purchase price, or negotiated. Resource is a rate per hour times the usage in the work definition. Overhead is a rate applied to a basis. Notice that two of those three are somebody else's number multiplied by something you built. Here is the dependency, stated hard. The roll-up is only as good as the structure and the work definition. A missing component or a wrong resource basis produces a wrong standard — and every subsequent variance is measured against that wrong number. That is the part worth sitting with: the error does not just make one cost wrong, it makes every variance report for the next year measure against a fiction, and the variances…
The full lesson is part of the course
The video, the complete written lesson and the module quiz are included in Implementing Manufacturing and Materials Management: From Empty Plant to Costed Work Order, with a certificate on completion and a fourteen-day refund window.