B4 (Labor Efficiency)

This cost component increases or decreases the cost of the labor that is required to produce an item. If you have set the manufacturing constants to modify costs by work center efficiency, the program creates a cost component (B4) for labor efficiency when you run the Simulate Rollup program. In addition, if the efficiency for a work center is equal to zero, the system does not perform a calculation for that work center.

The system calculates labor efficiency only for direct labor hours as:

Parent labor efficiency cost = sum of all efficiency calculations for all operations on the item's routing

Calculating the operation labor efficiency cost requires these calculations:

• ((Direct labor hours) ÷ (accounting cost quantity)) × (time basis code) ÷ ((crew size) ÷ operation yield percent)) = factored labor hours

  Note: (Release 9.2 Update) Divide the direct labor hours by the accounting cost quantity only if the accounting cost quantity is not zero and time basis is fixed (time basis code is 0).

• (Work center efficiency) ÷ (percentage conversion) × (factored labor hours) = Factored efficiency hours

• Labor efficiency cost = (factored labor hours − (factored efficiency)) × (direct labor rate)