Hubbell Policies

Standard Labor Rates: Standard labor rates should be based on upcoming year budgeted labor expenses that would include the direct labor expenses. The budgeted expense would include the expected inflation. The cost of labor should reflect the cost of labor for the budgeted production.

To build upon the previous example, if: •

budgeted direct labor expense for upcoming year = $1,906,000; and • budgeted earned hours for upcoming year = 103,000, then • the budgeted direct labor rate for upcoming year = $18.50.

Standard Burden: Manufacturing Overhead Expense Pool : In general, expenses related to manufacturing, other than the portion of certain costs already allocated to or classified as standard materials and direct labor costs defined above, are charged to the manufacturing expense pool. Salaried and indirect labor contractual increases should follow the same process as the calculation above in the standard labor rates section of this Policy. The following departments ’ / functions ’ costs are generally included in the manufacturing overhead expense pool:

operations management;

• • • • • • • •

all direct production departments;

purchasing;

receiving/ incoming inspection;

quality control;

manufacturing engineering;

production control;

tool rooms;

• inventory storerooms (other than finished goods stores); • maintenance departments; • shipping department (to the extent the activities are related to movement of materials between manufacturing sites, but specifically excluding activities related to the shipment of finished product into the distribution to the customers ’ stream); • plant security (to the extent related to the manufacturing portion of the facility); • environmental & safety (to the extent related to current manufacturing activities); • scrap expense, net of specifically identifiable proceeds from the sale of scrap; and • other manufacturing support departments.

Expenses from the following departments may be charged initially to indirect manufacturing expense or selling & administrative expense and then allocated, to the extent applicable, to cost of sales, including direct manufacturing, warehousing & distribution, and engineering:

Human Resources;

• • • • • • •

IT;

Cost Accounting/Site Finance;

Accounts Payable; Cycle Counting;

Payroll Department; and

Employee Benefits.

It is permissible to charge-out, or distribute, cost initially recorded within one department to other departments. The

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