COSTING DIRECT LABOR

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COSTING DIRECT LABOR
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DIRECT LABORWHAT IS IT?

• LABOR THAT CHANGES THE PRODUCT, THAT ADDS VALUE,
  THAT FINISHES THE PRODUCT.

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GENERAL RULES TOIMPROVE COST RESULTS

• ALWAYS COST IN THE CONTEXT OF USAGE.
• USE DETAIL TO MINIMIZE ERRORS OF AMBIGUITY.
• ADJUST DETAIL TO FIT EXPERIENCE.
• USE DETAIL TO POINT OUT AREAS OF OPPORTUNITY.

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COMPONENTS OF DIRECT LABOR

• IN A MEASURED ENVIRONMENT
• STANDARD LABORPiece Rates
• EXCESS LABORBuild-up, Wait Time, Down Time,
  Training Allowances, etc.
• IN AN UNMEASURED ENVIRONMENT
• ALL LABOR

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A FEW RULES FORCOSTING DIRECT LABOR

• IT IS ALWAYS COSTED BY PRODUCT IF POSSIBLE
• IT IS NEVER GOOD TO INCLUDE DIRECT LABOR AS A
  PART OF THE MULTIPLE OR OVERHEAD FACTOR
• COST IT THE WAY IT WILL BE DONE

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CUTTING LABOR3 WAYS TO COST DIRECT LABOR

• THE AVERAGE APPROACH
• A STEP UP FROM AVERAGING
• A DETAILED APPROACH IN AN UNMEASURED CUTTING ROOM

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THE AVERAGE APPROACH

• TOTAL ALL PAYROLL DOLLARS SPENT AND MAN HOURS
  WORKED
• TOTAL ALL UNITS CUT
• DIVIDE DOLLARS BY UNITS
• ANTICIPATE PAY INCREASES
• THIS APPROACH IS NOT RECOMMENDED

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AN EXAMPLE OF AVERAGE

• A CUTTING ROOM HAS PRODUCED 71,020 PIECES IN
  1,887.6 HOURS FOR A PAYROLL OF 15421.70 W/O
  OVERTIME. THE AVERAGE HOURLY WAGE IS EXPECTED TO
  GO TO 8.52. WHAT COST PER PIECE IS INDICATED FOR
  THE NEW COSTING PERIOD?

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WORKING THE EXAMPLE
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STEPPING UP, FROM AVG.

• USING TOTAL DOLLARS PAID FOR LABOR, DIVIDE BY
  HOURS THE CUTTING ROOM WORKS
• LOOK AT OUTPUT PER HOUR FOR DIFFERENT TYPES OF
  CONTRACTS
• APPLY THESE DIFFERENCES TO CONTINUING STYLES AND
  NEW STYLES BY RATIONALIZATION

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A STEP UP FROM AVERAGE
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A DETAILED VARIATION ON AVERAGING

• EACH EMPLOYEE KEEPS A LOG BY FUNCTION AND STYLE.
• USE LOGS TO SUMMARIZE HOW TIME IS SPENT.
• USE LOGS TO SET STANDARDS.

• COMPARE STANDARDS TO ACTUAL.
• USE COMPARISION TO ESTABLISH RATIOS OF LOSS
  CAPACITY.

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THE MEASURED CUTTING ROOM

• STANDARDS CAN BE APPLIED TO THE OPERATIONS IN
  CUTTING. LOOK AT A TEE SHIRT AS AN EXAMPLE.

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MEASURED SPREADING
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CUTTING ASSEMBLY LABOR
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MEASURED DIRECT LABOR FOR SEWING AND FINISHING

• PIECE RATES, WHAT ARE THEY? WHERE DO THEY COME
  FROM? WHY ARE THEY DIFFERENT AT DIFFERENT PLACES?

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WHAT ARE PIECE RATES?

• The amount of money paid for a specific task, or
  the time allowed to complete the task at the
  standard pace.

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WHERE DO PIECE RATES COME FROM?

• FROM TIMESTUDY
• FROM HISTORIC DATA
• FROM OTHER COMPANIES
• FROM SCIENTIFIC WORK MEASUREMENT PACKAGES

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WHY ARE THEY DIFFERENT?

• MACHINERY IS DIFFERENT
• ALLOWANCES ARE DIFFERENT
• ERRORS CAN BE MADE BY THE BEST OF ENGINEERS

• HOURLY PAY VARIES
• METHODS CAN BE DIFFERENT
• COMPANYS OFF-STANDARD PAY POLICIES VARY

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MEASURED SEWING