Plus & Minus has this extremely powerful program that is included in every customer’s setup. It is a program that other vendors sell as a stand-alone program for a large number of dollars. Here’s what it contains:
You are a shop that is selling a manufactured product. By manufactured product I mean a product where you take raw material and add value to it in both labor and manufacturing overhead. This process can take place in either one step or multiple steps, as in a multi-step manufacturing process. The end of the process results in a decrease in WIP because the unit has been transferred to the Finished Goods account.
During the process, you have a worker who is paid a certain amount per hour and the processing machine is “charged out” at a certain amount per unit of usage, as in “per hour.”
Management must compare the estimated cost of a job to the actual cost of the job. In all likelihood, the most expensive part of this process is the labor and the associated payroll burden. Capturing the actual labor cost is critical to the success of the company. Should this labor cost capturing be done after the fact as a “best guess” after the project is complete? Or can you capture the data on an ongoing basis so that management can monitor the accumulated amounts to the budgeting amounts? Without a doubt, intermittent accumulated data collection is the preferred method.
How can Plus & Minus help you succeed? Our Shop Floor Cost Capturing (SFCC) program is very easy to use. The shop floor manager can carry a tablet (Apple or Windows) with the SFCC program loaded in and a scanner with a USB plug attached to the tablet. The SFCC shows the drop-down menu for the names of the workers and the drop-down menu for the machine the worker is using. The only piece of paperwork is a list of all projects with info such as the customer’s name and internal project number. The project number is represented in a bar code which, when scanned, activates the aforementioned drop-down menus discussed.
The shop floor manager can bring up the worker’s name and the machine being used which starts a timekeeping program so you now have a date time group and a start time for the worker and the machine. When the worker either ends the day or finishes the project, the time is captured for the worker and the machine. If the worker starts on another machine, that change can be captured.
In addition to the direct labor time, the machine time and its “charge out” rate is also captured. The “charge out” rate is usually the cost per hour that management wants to use, whether the time is a pure cost, as in depreciation, or a fully loaded cost which includes all the Indirect Costs associated with the machine as well as Manufacturing Overhead.
By capturing these data points in great detail, management can fine-tune the costing process by comparing actual costs to budgeted costs. If the budgeting and costing were absolutely honest, there will be a variance. Absolute accuracy begets absolute suspicion. The overall objective is to keep comparing the variances so that both the budgeting and the actual become smaller and smaller variances.
Now here is the icing on the cake that is so delicious that we used it as a filler for the cake layers. Because the SFCC is part of the Plus & Minus program, all the hours collected for each employee automatically feed into the Plus & Minus payroll system, eliminating the need for bookkeeping duplicity. Why enter data twice when you can enter it only once? And that payroll data flows seamlessly into the financial records for management reporting. Does it get any more beautiful? We don’t think so either.
