Examples for Process Cost and Set up Cost

Setup cost is any cost incurred in preparation for processing a single unit of measure, and Process cost is any costs incurred for processing multiple units of a product, based on the unit of measure (UM) setup.

Example: Cost Calculation for Building Finished Goods (UM = Lot)

Example 1:

Setup Cost: $9
Process Cost (Proc Cost): $2
UoM (Unit of Measure): Lot

Materials Used:

Material 1: Cost = $10 (1 EA)
Material 2: Cost = $5 (1 EA)
Material 3: Cost = $20 (1 EA)

Number of Finished Goods (EA) generated = 3

1 Lot = 3 EA

Total cost:

Cost Material1 x 1EA + Cost Material2 x 1EA + Cost Material3 x 1EA + Setup Cost x 1 + Process Cost x 1

10 + 5 + 20 + 9 + 2 = 46

Here, the total cost is $46.

Example: Cost Calculation for Building Finished Goods (UM = EA)

Example 1:

Setup Cost: $9
Process Cost: $2
UoM (Unit of Measure): EA (Each)

In this case, because UM = EA, the process cost will apply for each processed unit.

Materials Used:

Material 1: Cost = $10 (1 EA)
Material 2: Cost = $5 (1 EA)
Material 3: Cost = $20 (1 EA)

Number of Finished Goods (EA) generated = 3

Total cost:

Cost Material1 x 1EA + Cost Material2 x 1EA + Cost Material3 x 1EA + Setup Cost x 1 + Process Cost x 3

10 + 5 + 20 + 9 + 6 = 50

Here, the total cost is $50.

Examples: Cost Calculation for Building Finished Goods (UM = C and M)

Example 1: UM = C, Output = 3

Setup Cost: $9
Process Cost: $2

UoM : C

Materials Used:

Material 1: Cost = $10 (1 EA)
Material 2: Cost = $5 (1 EA)
Material 3: Cost = $20 (1 EA)

Number of Finished Goods (EA) generated = 3

Total cost:

Cost Material1 x 1EA + Cost Material2 x 1EA + Cost Material3 x 1EA + Setup Cost x 1 + Process Cost x (3EA/100)

10 + 5 + 20 + 9 + 2 x 0.03 = 35 + 9 + 0.06 = 44.06

Here, the cost calculation is proportional to the UoM.
For instance,
Processing Qty = 275
Now, because UM = C, the system divides 275 by 100, then multiply the result for the processing cost. Say, processing cost = $2
275 / 100 = 2.75 x 2 = $5.5

Here, the total cost is $44.06.

Example 2: UM = C, Output = 250

Setup Cost: $9
Process Cost: $2
UoM (Unit of Measure): C

Materials Used:

Material 1: Cost = $10 (per EA)
Material 2: Cost = $5 (per EA)
Material 3: Cost = $20 (per EA)

Number of Finished Goods (EA) generated = 250

Total cost:

Cost Material1 x 250EA + Cost Material2 x 250EA + Cost Material3 x 250EA + Setup Cost x 1 + Process Cost x (250EA/100)

2500 + 5000 + 1250 + 9 + 2 x 2.5 = 8759 + 5 = 8764

Here, the total cost is $8764.

Example 3: UM = M, Output = 9999

Setup Cost: $9
Process Cost: $2
UoM (Unit of Measure): M

Materials Used:

Material 1: Cost = $10 (per EA)
Material 2: Cost = $5 (per EA)
Material 3: Cost = $20 (per EA)

Number of Finished Goods (EA) generated = 9999

Here, M counts the cost for each 10000 EA.

Let's suppose the input is 250 EA and the output is 9999 EA.

Total cost:

Cost Material1 x 250EA + Cost Material2 x 250EA + Cost Material3 x 250EA + Setup Cost x 1 + Process Cost x (9999EA/100)

2500 + 5000 + 1250 + 9 + 2 x 9.999 = 8759 + 19.998 = 8778.998

Here, the total cost is $8764.

Example 4: UM = C, Output = 9999

Setup Cost: $9
Process Cost: $2
UoM (Unit of Measure): C (100 EA)

Materials Used:

Material 1: Cost = $10 (per EA)
Material 2: Cost = $5 (per EA)
Material 3: Cost = $20 (per EA)

Number of Finished Goods (EA) generated = 9999

Here, C counts the cost for each 100 EA.

Let's suppose the input is 250 EA and the output is 9999 EA.

Total cost:

Cost Material1 x 250EA + Cost Material2 x 250EA + Cost Material3 x 250EA + Setup Cost x 1 + Process Cost x (9999EA/100)

500 + 5000 + 1250 + 9 + 2 x 99.99 = 8759 + 199.98 = 8958.98

Here, the total cost is $8958.98.