Actual Costs – PBS™ Material Requirements Planning
The following is part three of a 4-part series about increasing profitability with job costing. We hope you find it useful.
PBS™ MRP for small business and mid-sized companies (Material Requirements Planning) is a powerful system for operational and financial planning.
In our Inventory Management item master, there’s a breakdown of material costs, outside costs if any, costs for labor and burden cost (overhead). Material costs incurred on purchase goods is calculated in the Bill of Materials.
If a business owner looks at the overall job costing picture and doesn’t like it, a quick report can be run out of Product Definition. This will show where an item’s costs are coming from.
This report includes labor cost and burden to provide a picture of the total cost. If something looks off-base, numbers can be double checked for input errors or typos in the entries.
PDF report breakdown includes the Bill of Materials, which shows the cost of our materials. At that point, a company could opt for new vendor or reduce the use of a product.
These anticipated costs have come from the bill of materials and routings and rolled up to include labor and burden (overhead).
How does a business know if the anticipated costs are correct? This is where the advanced modules come into play, such as Manufacturing Job Costing.
This can track time and verify time against those routings, so a user can identify what was anticipated versus the data we collected.
With PBS™ MRP for small businesses, a company can now begin to make better choices and dial in costs better. Users can track an actual cost on a job, and can track labor against a job. The system will accumulate this information in order to show actual costs at the end of the day.
This is really critical information if labor is fairly intensive in the product line. Anybody who can correct this information can start to really leverage this information, in order to calculate our labor and material and overhead.
Moving through the process of tracking actual costs, a user see the actual cost down to the cost per unit – and review the actual data against the estimate.
Folks that are not Job Shop will often do this on a selected basis. They can choose certain orders, and then they will go through the actual job cost report and look at the details to see where their estimates were high or low.
They may need to scrap some material or rework something on the floor, or maybe the routing is incorrect, overestimating material usage. Now corrections can be made to give a far more accurate cost picture using PBS™ MRP for small businesses and mid-sized companies.
Long before a business owner views the general ledger, a company can identify where it’s going wrong. With PBS™ MRP for small businesses, consistent issues can then be corrected in order to improve profitability.
The next post will talk more about how a manufacturing operation can make better decisions on product market positions.
To learn more contact your Partner or Dave Dorsey at 800-969-7900 x145. Or Contact Us – We are here to help.