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labour cost per unit formula 0 + . This page looks at how labour costs are calculated in practice. Businesses pay workers compensation that can include both wages and benefits, such as health insurance and retirement contributions. When Pierre puts his cakes in the shop window for sale, he knows he must mark up the The standard direct labor hours allowed (SH) in the above formula is the product of standard direct labor hours per unit and number of finished units actually produced. Therefore the risk for costs associated with performance is absorbed by the entity which owns the unit rate. If your labor costs for the first quarter come to $33,000 and your gross sales for that quarter were $100,000, your labor cost percentage is 33 percent. 00 per hour The direct materials cost is ?25 per unit of Diamonds and ?30 per unit of Clubs. 40 hours per unit 9,725 hours Machine Hours . g. 25. 2 to determine that on a per unit basis, their contribution margin is: This means that for every Blue Jay model they sell, they will have $80 to contribute toward covering fixed costs, such as rent, insurance, and manager salaries. What are the key factors that determine unit labour costs? Rate of change of wages in the labour market. Additional cost incurred per unit of time saved) following formula is used :-Crash cost per day (or) Activity cost supply = Crash cost – Normal cost. Consequently, the units for all terms in Equation (5. 25 cents per zipper - $. Labor costs are segregated in two categories: direct labor costs and indirect labor costs. 25 hours per unit . Believe the answer is $414. Add all variable costs required to produce one unit together to get the total variable cost for one unit of production. Once you have your staff all divvied up, you can compare what each team costs you and see if you can tinker with the combination of staff you schedule during each shift to bring your restaurant’s labor costs down. This sub-field is a general assessment of the product cost at the stage in the process relative to the machine (cell or other method of categorizing the profit center) uses it for raw material. 4)(5) = $60. Idle time (from the limited knowledge I have from previous chapters) is an indirect labour cost. 15 hours, the variance is 0. This is your applied overhead. Labor Variable O/H (labor variable overhead) Enter a rate or percentage, as determined in the manufacturing constants, that the system uses to calculate the standard cost for variable labor overhead. It is always expressed in the terms of percentage. What we’ve found out is the total labour cost. 8 minutes), hence 0. Carrying cast % * Carrying cost of unit 7) Associated cost = Buying cost pa + Carrying cost pa T × Ln = Time required for the nth unit (E-1) where T = unit cost or unit time of the first unit L = learning curve rate n = number of times T is doubled If the first unit of a particular product took 10 labor-hours, and if a 70% learning curve is present, the hours the fourth unit will take require doubling twice—from 1 to 2 to 4. You could also evaluate direct labor costs as a percentage of revenue. Figure 10. 005 D 2 + 2. For a quick second example, the employee getting $7,000 per month earns about $318 per day for an average of 22 workdays per month, which is about $40 per hour for eight hours. The average cost of labour per unit of output; effectively, the proportion of the cost of production of a product accounted for by labour costs. Example of the Cost per Unit. Your baseline for this crew is $86. Add together direct materials, direct labor, and overhead to arrive at the standard cost per unit of $289. Like other cost elements (direct materials and manufacturing overhead), the standard labor cost per unit is written Labor Cost per Item . Example 5-7: Decomposition of a building foundation into design and construction elements. Since the standard direct labor rate is $ 10 per hour, the labor efficiency variance is $ 2,000, computed as follows: Labor efficiency variance = (Actual hours worked – Standard hours allowed) x Standard rate = (22,200 actual DL hours x 22,000 standard DL hours) x $10 per hour = 200 hours x $10 To find the manufacturing overhead per unit In order to know the manufacturing overhead cost to make one unit, divide the total manufacturing overhead by the number of units produced. = $20 + $12 + $8 + $200,000 / 50,000. Copywriter: $1,442. 00 per hour Labor hour prod. Run Labor . 00: 300. Note that W i L i yields the labor cost per unit of Q i, or the labor unit cost of task i. 2. 0 lbs. Opening and closing block of finished goods may be put in a subsidiary statement, which together with the total cost of production and sales will reveal profit. Causes for adverse labor rate variance may include: Increase in the national minimum wage rate. of Units produced = 6 x 6 = 36 Rowan Method = (Hourly rate x Time taken) + (Time Saved x Time Taken) x Hourly Rate Time Allowed = (6 x 6) + (4 x 6) x 6 10 = 50. (Actual unit quantity consumed - Budgeted unit quantity consumed) x Budgeted cost per unit. b) He is paid guaranteed wages according to time rate which is ₹ 3,000 p. 5 hours on every single unit during production, then if it manufactures one thousand units per week, then its standard cost of labor would be seven thousand five hundred dollars. of hours (5,000 + 625) = 5,626 hrs. $60,000 ÷ 6,000 direct labour hours = $10 per direct labour hour (ii) Estimated unit cost of the proposed new product under traditional absorption costing $ per unit Direct material 4 kg per unit at $5·00 per kg 20·00 Direct labour 0·5 hour per unit at $10·00 per hour 5·00 Direct other expenses 2·00 –––––– Variable cost per The manufacturer will want to analyze the cost of another multi-unit run to determine the marginal cost. labor Cost Per Unit can be calculated by taking the number of hours to spend per product at the rate per hour. A successful business relies on being able to make a profit. 50 = $11,500 = $10,925 = $11,400 $575 U $475 F The standard formula to calculate the prime cost per unit is very simple: Prime Cost per Unit = Total Prime Cost / No of Units Produced. overhead 2. Remuneration on piece work • Under this system, wage are paid on the basis of production • The formula is as follows: Earnings = number of unit produced * rate per unit Example: If a worker is paid $15 per unit and he produces 20 units in 7 hours the total wages will be calculated as 20*$15 = $300 12. It can be used in two ways to raise awareness of your true labour costs and to improve your profitability: 1. Furthermore, each relevant metric has been stage-length adjusted with the formula displayed. Fixed cost per unit decreases as volume increases & Rancor Inc. Further, we will be discussing on transport costing as an illustration of service costing. Yost Company needs to prepare a Direct Labor Budget Hackett Industries is preparing its direct labor budget Inappropriately high setting of the standard cost of direct labor which may, in the hindsight, be attributed to inaccurate planning. e. It can be measured with the help of the following formula: Solution of Problem # 2 Price Rate System = Rate per Unit x No. In other words, the cost can be traced directly to the unit product. Labour efficiency variance = (5,050-5,000) x Rs 30 = Rs 1,500 (unfavourable) It may be noted that the standard labour hour rate and not the actual rate is used in computing labour efficiency variance. Given the price of labor is $20 and the price of capital is $40, determine the cost minimizing combination to produce 72 units of output and the respective total cost. Wage base, productivity and unit labour costs in Italy. In the short run, production can be varied only by changing the variable input. 0 B Direct labour cost for period £50,000 £80,000 Batch size 40 units 80 units Cutting 6 operations per unit 4 operations per unit Forming 2 operations per unit 3 operations per unit Machine set up 1 per batch 1 per batch Inspection 2 times per unit 2 times per unit Machine hours 2 per unit 1. 00 per pound $2. KPI Unit: time Variable costs (VC) are the costs of the variable input, labor, or wL, where w is the wage rate and L is the amount of labor employed. A better approach to calculate your labor costs is similar to shipping. Formula To Calculate Labor Cost Percentage To calculate Employee Labor Percentage you need to divide the total labor cost during a particular period by gross sales/revenue during the same period and multiply the result by 100. If the volume variance relates to direct labor, the variance is called the labor efficiency variance, and the formula is: (Actual labor hours - Budgeted labor hours) x Budgeted cost per hour Each unit of Product A requires 1. Favourable recent developments in wage costs and The ADP provides unit costs with each of these expenses either included or excluded. 80 + $48 + $40 = $377. An adverse labor rate variance indicates higher labor costs incurred during a period compared with the standard. 00 per unit + fixed costs of 10. Summing value added per unit over all units sold is total value added. 08 man-hour per unit. (If a trade is listed, the hourly labor cost—the wage rate—is found on the inside back cover. Variable Cost Per Unit = Change in Cost / (divided by) Change in Units. com During a month, Company B has a total cost of $55,000 in direct labor and $66,000 in factory overhead costs. 00, labor cost per unit of $1. 6. Marginal cost (MC) is the change in total cost per unit change in output or ∆C/∆Q. 00 : Total Operating Costs (Pre-harvest & Harvest) 3,738. Industry average cost for this job = $4200 (120 x $35) To achieve a 30% gross margin, this labor cost needs to be marked up approximately 43% Industry average price = $6006 ($4200 x 1. = (Q/2)H + (D/Q)S + PD, where P = cost of the item per unit where, D = Demand per year S = Ordering cost for each order H = Holding (carrying) cost per unit per year p = Production or delivery rate u = Usage rate where, D = Demand per year S = Ordering cost for each order IP = H = Holding (carrying) cost per unit per year A firm sells its product for $30 per unit. 00 Labor 1 hour at $10. 70 per hour. 6 hours of labor at a labor rate of $8. Unit Labor Cost (ULC) is how much a business pays its workers to produce one unit of output. Since hospital salaries are about 35 to 45 percent of total Indirect labor cost is the cost of labor that is not directly related to the production of goods and the performance of services. Format and Example. 00, and a fixed cost of 15,000, the total cost can be calculated as follows. This is defined as: For example: if W = $30 and λ = 10, then unit labour cost is $3, that is $30/10 units = $3 per unit. Let us understand it with a simple example. 00). An employer’s overhead cost per employee is also considered, in addition to the employer’s annual taxes. the denominator is measured in numbers of pencils per worker, the unit labor cost is measured in euros per pencil (i. Similar to overall equipment effectiveness (OEE), OLE measures availability, performance, and quality. 50 per unit and variable factory overhead of $0. Therefore, we are going to view the computation of transport costing in this section. In addition, productivity performance between projects can also be easily compared if contractors keep cost accounting records in man-hours. 50 hours per unit . Divide total miles driven by the number of gallons used. (The direct labor efficiency variance could be called the direct labor quantity variance or usage variance. Therefore (Last Updated On: February 6, 2021) Before you can set a price for any item you manufacture, you must calculate the per-unit manufacturing cost. The equation looks like this: direct labor cost equals total labor hours times labor rate. How to calculate marginal cost. In this case, we need 4 columns to represent the unit cost and to be automatically filled out in the takeoff schedule. This will not always be the case. This assures high quality and reliability within the products to eliminate rework, which increases labor costs per unit. Thus, VC = wL . 5 per direct labour hour. 75, and it takes 0. 50 during April and incurred direct materials cost of $100,000, direct labor costs of $75,000 and overhead costs of $45,000 during the month. This is a spreadsheet in excel to calculate your total cost of labour. and for a double-unit 5 marla house, it would cost around PKR 770,250. Unlike direct labor cost, indirect labor costs are not so readily associated with specific units. The $108 favorable efficiency variance is determined by subtracting $4,788 standard overhead (13,300 units by the variable overhead per unit predetermined rate of $0. The total estimated overhead is ?720,000. 12. For example, if a company’s total direct labor cost for one hour is fifteen dollars and it expects to utilize 0. 8 (F) Standard output for actual time = 1000 units/800 hours x 760 hours = 950 units Verification Labour Cost Variance = Labour rate variance + Labour efficiency variance = Rs. Estimating 6 working hours per day, the total man hours is obtained from multiplying the following: 15 x 10 x 6 = 900 hours. ABC Step 2B Find Each Product's Direct Materials Cost per Unit . (ii) If his production during the month is 800 units. The direct cost if each bid item represents the sum of its material, labor, equipment and subcontractor costs. Direct Labour Cost per Piece Direct labour cost per piece (For first payment method) = Total earning by the operator / Number of pieces produced = R 170. Conversion cost per unit would be: 121,000/24,000= $5. 00 Materials handling $200,000. 4. LRV = (Standard Rate Per Hour – Actual Rate Per Hour) x Actual Hours Unit Level. Formula for Variable Costs . 20 direct-hours at a cost of $9. It tells us, how many Dollars (or Euros) are being spent in order to get one flow unit through a process (e. To calculate this metric, divide direct labor costs by total revenue for the period. A cost driver at the unit level only affects one production unit and its costs. Per Unit Product Cost = (Total Cost of Direct Materials + Total Cost of Direct Labor + Total Cost of Direct Overheads) / Total Number of Units See full list on educba. 7 policies / hour `10,000 Units Produced, Sold for Rs. Comparison cost per unit value between two different Product Cost = direct materials + direct labour + manufacturing overhead CM = Selling price per unit - variable cost CM ratio = CM ÷ selling price per unit Sales - VC = FC + Operating Income (OI is 0 on the breakeven point) Break-Even Point in Units = Fixed Costs ÷ CM per unit Break-Even Point in Dollars = Fixed Costs ÷ CM Ratio Required Sales = Target Operating Income + FC + VC Required Sales in Units (through CM) = (Fixed Costs + Target Operating Income) ÷ Required Sales in Units If the local wage rate including burden and fringe benefits is LE30 per hour, the unit labor cost becomes LE16. Solution #2 AH 1,150 X AR $10. For example, if the hourly rate is $16. Eliminate Overscheduling. 02 per swab, your total test cost adds up to $5. Most companies view cost per unit as "labor per unit". The equation looks like this: direct labor cost equals total labor hours times labor rate. ) Labor-Hour Cost Crew C-14C x Labor-Hour Units = Labor $36. Compute the total product cost per unit under variable costing if 30,000 units had been produced. 00 per hour Variable costs (VC) are the costs of the variable input, labor, or wL, where w is the wage rate and L is the amount of labor employed. Further, the cost sheet should give ‘cost-per unit’ in the previous period also, if available, for the purpose of comparison. For example, in the electronics component industry, the cost of developing an integrated circuit is so large that the first units produced must be priced high. 62/1750 = R 0. 69 (additional labor costs) = $1,650. 8 Labour yield variance = (Actual yield–Std. 00 Maintenance $30,000. If the wage rate is LE20 per hour, the unit labor cost becomes LE11 per m2. The standard direct labor hours allowed (SH) in the above formula is the product of standard direct labor hours per unit and number of finished units actually produced. 75 / unit One way to measure that is through a simple formula that compares the number of hours worked with the volume of patients seen in that hour. **Standard hours of 21,000 = Standard of 0. Variable cost/total quantity of output = x variable cost per unit of output Variable cost per unit = = $72/72 = $1. 50 per m2. The total cost is 4*20 + 2*40 = $160. 69 per hour Jo u r neyman Carpenter $3. Unit labour cost (ULC) measures the average cost of labour per unit of output. 5 as computed below: = $18 × 3. Expected overtime levels. In this example, beginning work in process is zero. 00 per unit. Labor costs are segregated in two categories: direct labor costs and indirect labor costs. d) Unit Conversion Cost. 5 hours 14. However, in direct labor cost calculations, companies The question clearly asks for direct labour costs. Controlling labour cost involves complex procedures since it involves human beings and controlling human behaviour is complex. , cost per unit) is given below: Format of Service Costing. 00: Total Harvest Costs: 2,850. Then, a common overhead rate can be calculated taking the base as direct labour hours. Labour as a factor of production. 10 per unit. 50 / unit Product B Direct labor per unit: $1,050,000 / 2,100,000 = $0. 00 per hour and the time to fall and buck a tree is T = 4. Company B produced 24,000 units during the month. 00 = $12. Costs incurred by businesses consist of fixed and variable costs. Quantity Price Cost Inputs or Hours or Rate per Unit Direct materials 3. Variable vs Fixed Costs in Decision-Making. 25hours = $58. How to solve: The standard costs for a unit of product are shown below: Materials 2 pounds at $1. According to the standard cost card, each plate should require . Bricks, Sand, Crush and Rori The labour cost index (LCI) is an indicator which measures the cost of labour. See full list on getsling. 00 per hour on the project. 00$ per lb. Payroll tax percentage related to the pay per hour. If this field contains a percentage, it is the percentage of direct labor. It is calculated as the ratio of labour costs to labour productivity. We calculated total equivalent units of 11,000 units for materials and 9,800 for conversion. 4 yards x $10 per yard - $40. In our example, the standard time to complete one unit is 3. 5 hours The effect of changes in remuneration methods and changes in productivity on unit labour costs To increase competitiveness, employers will try to reduce unit costs and will often attempt to do this by offering employees productivity payments. In order to determine the construction cost of the grey structure of a 5 marla house, we must first identify the amount of money needed to hire labourers. The production function of Crew follows the formula: Q = 50K + 50L, where Q = barrels of beer, K = units of capital, and L = units of labor. Cost of direct labor: The cost of direct labor is defined as the total wages per unit of time divided by the flow rate per unit of time. If you spent $50,000 on the payroll during the second quarter and sold $200,000 worth of goods during that quarter, your labor cost is 25 percent. The total actual direct labor cost and total standard direct labor cost may be computed as follows: Total actual DL cost = Actual hours used x Actual rate per hour. 04 per test. The cost is usually fixed in the unit and according to the rate and level of expertise of labor. The rate per unit increases on Labour cost represents the remuneration for employees’ effort in the production process. Below is the breakdown of our total cost per unit. Ge n e r al Carpenter Fo r eman $3. If company XYZ sells 10,000 pizzas, then its cost per unit would be: Cost per unit = $5. ABC International incurs a total of $50,000 during March in direct labor and related costs, as well as $86,000 in factory overhead costs. Contr of $24. = 6. Prime cost per unit is often calculated to determine the cost of production of each unit of output so that the organization could fix a minimum price. What are the key factors that determine unit labour costs? Rate of change of wages in the labour market. At a resource cost of $30. As part of a costing exercise a firm may need to determine the labour cost of a product or unit. had a per-unit conversion cost of $2. So now your labour costs are as follows: Lead: $40/hr + $2. 21 per hour. The cost minimizing combination would be to employ four units of labor and 2 units of capital. g wood works requiring carpentry and joinery, art work, electrical/mechanical works. As such, a ULC represents a link between productivity and the cost of labour in producing output. ABC Company has total variable costs of $50,000 and total fixed Labor Costs Formula A single formula will not serve the many different needs associated. Under absorption costing, a company had the following unit costs when 9,000 units were produced. For instance, consider a production process in which labour input and costs follow an 80% learning curve. Now that you’ve calculated your predetermined overhead rate, you can apply it to jobs for the purpose of job costing, as the applied overhead cost. Unit labour costs (ULC) measure the average cost of labour per unit of output. The average cost of producing the first run is $100, but the marginal cost is the additional cost to produce one more unit. 75, and it takes 0. So that's step one: get to a gross hourly cost. Benefit costs (such as medical and dental insurance) per hour. Influenced by bargaining power of workers / strength of a country’s trade unions; Influenced by changes in national minimum wages; Can be affected by Cost Per Unit = (Total Fixed Costs + Total Variable Costs) / Total Units Produced. a) Suppose that capital can be purchased for $8 per unit, and labor costs $6 per unit. Thus, the cost per unit is not constant. 12 buttons x 50 cents per button - $6. 8400. Standard labour hour per unit = 5 hr . Normal time – Crash time. 20 hours per unit 10,800 hours. For this example, our hypothetical business has monthly overhead costs of $2,000, 250 total units sold, and a current price per unit of $50. 9/hr `Calculate productivity unit wise & non unit wise? Question Labor Productivity = 10,000 units = 20 units/hour 500hrs Labor Productivity = 10,000 units X Rs. 61 T × Ln = Time required for the nth unit (E-1) where T = unit cost or unit time of the first unit L = learning curve rate n = number of times T is doubled If the first unit of a particular product took 10 labor-hours, and if a 70% learning curve is present, the hours the fourth unit will take require doubling twice—from 1 to 2 to 4. The line below shows the actual costs per month. 31 (regular wages) + $207. 5. Standard labour rate per hour = Rs 30 . Once you have both the regular labor costs and additional labor costs for each employee, you can calculate the direct labor cost for the project. 43) – so this is the labor rate (price) included in the quote to the customer. 24 (F Just calculating the cost of direct labor and materials is not the end of the story when determining the actual cost of production. Therefore, the conversion cost per unit for the month was $6. Common variable costs to consider include cost of labor, cost of materials and variable overhead costs. 8 minutes), hence 0. Labour Cost = PKR 770,250. The labourers would charge around PKR 390 per sq. Influenced by bargaining power of workers / strength of a country’s trade unions; Influenced by changes in national minimum wages; Can be affected by a) He is paid ₹ 5 per unit on the basis of actual units produced by him or ₹ 4,500 per month whichever is higher. , total labor cost per unit of output, or the cost in terms of labor for the products we get). 1). To calculate cost per equivalent unit by taking the total costs (both beginning work in process and costs added this period) and divide by the total equivalent units. In the short run, production can be varied only by changing the variable input. Per Unit Labor Cost = Total Labor Cost / Total Number of Units Produced *Labor Cost can be determined by the time card of a labor for the production of a unit. If in the above example, suppose company A has produced 4000 units in the month, then the prime cost per unit would be: Total Prime Cost (154000) / No of Units Produced (4000) = 154000 / 4000 = 38. com Production overheads are added at rate of Rs. The second page of the spreadsheet highlights the labour cost per room sold. If this field contains a rate, it is the cost per hour. Influenced by bargaining power of workers / strength of a country’s trade unions; Influenced by changes in national minimum wages; Can be affected by UNIT LABOUR COSTS BIATEC, Volume XIII, 1/2005 1. 61. Following are the calculations involved in the direct labor budget: Planned Production in units × Direct Labor Hours Required per Unit = Budgeted Direct Labor Hours Required × Cost per Direct Labor Hours = Budgeted Direct Labor Cost. They charged those customers 100 X $250 = $25,000. 5 percent of revenue. 25. 4. 5 per unit Restaurants should aim to keep labor costs between 20% and 30% of gross revenue. Direct labor and direct materials are considered cost drivers at the unit level. The item unit rates are very much affected by the labour productivity we assume when we calculate the labour component of the unit rate. Calculated using the formula: total labour cost ÷ total level of outpu. Variable cost = Direct labor + 80% Utilities + Materials Variable cost = 40,00 + 80% x 22,000 + 35,000 Variable cost = 92,600 Variable Cost per Unit The unit labour cost is the wages paid to hire the amount of labour to produce one unit of the good. In economics, the sum of the unit profit, the unit depreciation cost, and the unit labor cost is the unit value added. This video explains what equivalent units are in the context of managerial accounting and demonstrates how to calculate the cost per equivalent unit with an Enter a rate that the system uses together with the setup labor hours of the associated routing to calculate the standard setup labor cost. Variable Cost Per Unit = Total Variable Expenses / Output of the Company. In our sample above, the Employee is paid a $25. 50 hour per unit . 1 zipper x . Doing so allows the business to earn profits on a long-term basis. The LCI is a Laspeyres index of labour cost per hour worked, chain linked annually, and based upon a fixed structure of economic activity at NACE section level. It does have the lowest cost per comparable unit of output, though. 62 x 3 How to solve: The standard costs for a unit of product are shown below: Materials 2 pounds at $1. 4. Owners, managers and analysts work on adjusting the cost per unit to meet sales goals. m. Expressing unit labor cost in this way shows that increases in hourly compensation tend to increase unit labor costs, and increases in output per hour worked—labor productivity—tend to reduce them. Product A Direct labor per unit: $450,000 / 900,000 = $0. Direct labor costs are the total costs incurred by workers directly working to produce goods or provide services for customers. Formula: Total number of hours spent on the production / number of pieces produced For example, in a bakery, if 2 members of staff working 8 hours a day achieve a production of 200 pieces of bread, the man hour per unit is: (2x 8) / 200 = 16/ 200 = 0. KPI Unit: time Divide labor cost by total operating costs For example, if labor costs $9,000 per month and total operating cost is $15,000 per month, divide $9,000 by $15,000 to get 0. 00 Labor 1 hour at $10. 25 hours X 100 customers X $25 = $18,125. 08 man-hour per unit. Businesses have to take into account both overhead costs as well as the direct expenses to calculate the long-term product and service prices. The approach you have already provided can fantastically work (attached) if the unit cost is limited to the Area (m2). Remuneration on piece work • Under this system, wage are paid on the basis of production • The formula is as follows: Earnings = number of unit produced * rate per unit Example: If a worker is paid $15 per unit and he produces 20 units in 7 hours the total wages will be calculated as 20*$15 = $300 12. 40,000 units to obtain flexible budget revenue and variable costs. Therefore, cost per unit can be calculated as follows. Total Pre-harvest Costs: $888. 00 per pound $2. This formula will give you the labor cost of a project for your crew. 69 (additional labor costs) = $1,650. Assume that the first unit requires labour costs of $1, 000 to produce. This equation says to take the total cost of production and divide it by the total number of units. Remuneration on piece work 01. ABC produced 20,000 units during March. Influenced by bargaining power of workers / strength of a country’s trade unions; Influenced by changes in national minimum wages; Can be affected by Under absorption costing, a company had the following unit costs when 9,000 units were produced. Now multiply the overhead allocation rate of $10 per hour by the direct labor standard hours of 4 hours per unit to come to a standard cost of overhead per unit of $40. Crew’s hourly rate X 3 (amount of workers) X 6 (number of weeks) X 40 (hours per week) = Cost of the project. Following is an example showing a simple direct labor budget format. Thus, VC = wL . Assume Outdoor Products produced 5,100 sleeping bags during the month of September. Therefore, the formula is From 2009 to 2011, nominal unit labour cost declined as a result of increased labour productivity and falls in labour compensation. Units completed = 1,000 . 00 per hour the variance in dollars would be $0. Required: Compute the labor efficiency variance and a labor rate variance. Direct labor variance = Total actual DL cost - Total standard DL cost. 00: Second Pick: ton: 6: 50. Table 4 shows cost drivers at the unit level for three types of chairs in a furniture company. e. Multiply the variable costs for one unit of product by the total number of units produced. 70 per hour. The labour cost per room sold (budget) line shows the amount that one is allowed to spend according to the budgeted figures. The wage rate payable to labour/labor. They can be expressed as the ratio of total labour compensation per hour worked to output per hour worked (labour productivity). Analysis The purpose of calculating the direct labor efficiency variance is to measure the performance of the production department in utilizing the abilities of the workers. 75 x 0. Labour/Labor Time × Rate per unit time payable to labour/labor. The labor cost formula takes into account an employee’s hourly wages, the hours they work in a week, and the weeks they work in a year. 04 per unit. In business, the difference between the sale price and the production cost of a product is the unit profit. 21 = $42. $10. Cost The Labour Cost Formula In order to effectively calculate your Labour Costs, you must be very methodical and review your assets on an individual basis. However, each unit of input receives an amount equal to what its employment adds to total receipts on the margin. Expected piece rate pay per unit produced. 62/1750 = R 0. 31 (regular wages) + $207. 00 Labor 1 hour at $10. 00 per hour Data: Metric Sales (units) Units Produced Labor (hours) Labor Cost ($) per hour Materials Cost ($) Equipment (Hours) Equipment Cost ($) Fixed Costs ($) Selling Price per Unit Productivity Analysis Assignment Total = 55 points: Productivity Calculation Tab (30 points) + What-lf Analysis Tab (25 points) Current Values Use column F for question 8 Parent (Domestic) Subsidiary (LDC) Parent Direct materials per unit + Direct labor per unit+ Variable MO per unit. Standard Labour Cost per unit [Actual Yield in units – Standard Yield in units expected from the actual time worked on production]. 1 Unit rate estimating A production process is budgeted to produce 50,000 units incurring a variable cost of 2,00,000 and a fixed cost of 1,20,000 in 25,000 man hours over a 10 day period. Product A direct materials per unit $675,000 / 900,000 = $0. 08 h (4. 6 “Direct Labor Variance Analysis for Jerry’s Ice Cream” shows how to calculate the labor rate and efficiency variances given the actual Formula for calculating unit labour costs is: Total labour cost ÷ total level of output. Variable Cost Per Unit Formula. Typically, the per-unit cost of your finished goods is derived by adding the costs incurred to produce a bunch of units and then dividing this cost by the number of units in the batch so produced. They are defined as the average cost of labour per unit of output produced. So the Employer Burden is $12. Formula for calculating unit labour costs is: Total labour cost ÷ total level of output. 10/unit = 22. For each direct labor hour worked, you’ll add $5 of overhead to the job. Raw Materials + Direct Labor + Allocated Manufacturing Overhead (20 + 10 + 16) + 10 + 10 = 56 i. When management has access to imperfect information about the production demands, their scheduling is just a "best guess. 00 Cost of Labour/Labor. 00 per labour hour: profit of $14. ULCs can be calculated as the ratio of labour compensation to real GDP. e. 10 hours per unit × 210,000 actual units produced and sold. 94 per hour Carpenter Fo r eman $3. Compute the total product cost per unit under variable costing if 30,000 units had been produced. 00 per Hour wage, while the total cost is $37. In contrast, if the possible service rate is x = 10 material loads per hour, then the expected waiting time of any material load for u = 5/10 = 0. In broad terms, unit labour costs show how much output an economy receives relative to wages, or labour cost per unit of output. Each cost is added together and then divided by the employee’s hours worked per year. *Since variable overhead is not purchased per direct labor hour, the actual rate (AR) is not used in this calculation. Overscheduling is a considerable source of labor costs in any operation. 89 units per hour. 0975 (only for the ongoing operation not the complete garment) Second method of calculating direct labour cost per piece. learning curve (lower labor hours per unit or lower costs per unit) by increasing volume. (h) Substitution Variance: This is a variance in labour cost which arises due to substitution of labour when one grade of labour is substituted by another. (i) If his production during the month is 1,200 units. In the example above, the cost to produce 5,000 watches at $100 per unit is $500,000. This video looks at how to calculate and interpret labour cost per unit. 21. The cost per unit should decline as the number of units produced increases, primarily because the total fixed costs will be spread over a larger number of units (subject to the step costing issue noted above). Fixed manufacturing overhead costs are $53,640, and variable overhead costs So for example, if a business uses 2,000 labor hours, has a variable cost per unit of 10. Required. 00, material cost per unit of $2. The unit cost of felling is UC = C/P where C is the machine rate for felling and bucking and P is the production rate. total unit product cost = direct materials + direct labor + variable overhead Unit labour costs (ULC) measure the average cost of labour per unit of output and are calculated as the ratio of total labour costs to real output. . Analysis The purpose of calculating the direct labor efficiency variance is to measure the performance of the production department in utilizing the abilities of the workers. Suppose, for example, the standard time to manufacture a product is one hour but the product is completed in 1. Apprentice: $15+ $2. 00 per unit = contribution of $24. Recall from Figure 10. The direct cost f a given item can be estimated using the unit rate estimating, operational estimating. Why Does Cost Per Unit Matter? Determine the cost per unit After adding up all the direct labor costs and manufacturing overhead, calculate the cost per unit by dividing the conversion cost by the number of complete units produced over the same time period. This product cost calculation includes elements such as the cost of raw materials, direct labor, and overhead costs. 5. 61 – $25. All variable overhead costs must be included and allocated across the production volume and added to the standard cost for a unit to track variances. 1 hours to manufacture one unit of a product, the direct labor cost per unit equals $1. It takes 3 direct labor hours to manufacture Diamonds and 4 hours for Clubs. Note: each unit is expected to take 40/80 = 0. 00$ Direct labor 2. The variable cost to make all of the cakes is $72. e. Shift differential pay rates per hour. Despite this, a common and simple formula is included below: Labor Costs = (total sales x labor %) / average hourly rate of labor 500,000 overhead / 10,000 direct labor hours = $5 per direct labor hour. The total variable costs of the business are calculated as follows. Direct labor cost per unit = $ 100/100 = $ 1 per LED Manufacturing overhead = $ 1000/100 = $ 10 per LED So, the total production cost comes to $ 18. One way to measure that is through a simple formula that compares the number of hours worked with the volume of patients seen in that hour. 625 = $ 18 per labour hour. 1 “Standard Costs at Jerry’s Ice Cream” that the standard rate for Jerry’s is $13 per direct labor hour and the standard direct labor hours is 0. Remuneration on piece work 01. 00 per hour, this waiting would represent a cost of (30)(0. Essentially, if a cost varies depending on the volume of activity, it is a variable cost. 20 per LED light. Compute the total product cost per unit under variable costing if 30,000 units had been produced. 44 per hour L a b o r er $1. 00 per labour hour. This has been the situation in Italy since 2001: a stagnation in labour productivity in combination with rising wages has led to a strong increase in labour costs per unit of output. Known as Work Hours per Unit of Service (WHPUOS), this allows managers to understand the cost of employing staff compared to the revenue made. The formula for calculating the planned ratio is the production cost price in monetary terms / purchase price. labor Cost Per Unit here is the direct labor cost that directly attributes to each unit cost. Solution: Solution 11Direct Labour Yield variance = Standard Cost per unit (Standard output for actual time – Actual Output) = Rs. 40 Hasley Method = (Hourly rate x Time taken) + (50% x Time Saved x Hourly rate) = (6 x 6) + (0. 22 500hrs X Rs. However, this time employee compensation increased with real labour productivity increasing at an even greater rate. Each unit of Product A requires 1. Direct Labour Cost per Piece Direct labour cost per piece (For first payment method) = Total earning by the operator / Number of pieces produced = R 170. ABC incurs $50,000 of Enter a formula into each of the cells marked with a ? below Review Problem: Activity-Based Costing Data Deluxe Tourist Annual sales in units 2,000 10,000 Direct materials per unit $25 $17 Direct labor-hours per unit 5 4 Direct labor rate $12 per DLH Estimated Overhead Expected Activity Activities and Activity Measures Cost Deluxe Tourist Total Labor related (direct labor-hours) $80,000 ? ? ? Add up the unit costs of everything that you use to perform one test to find your total test cost. As a labor cost example, if the direct labor hourly rate is $10 and it takes five hours to complete one unit, the direct labor cost per unit is $10 multiplied by five hours, or $50. Known as Work Hours per Unit of Service (WHPUOS), this allows managers to understand the cost of employing staff compared to the revenue made. 25 hrs per unit * 2,500 units = 625 hrs Total no. That too is before all those other costs that I discuss below. If you used one syringe at $2 per syringe, three vials at $1 per vial, and 2 cotton swabs at $0. LABOR-HOURS Per Unit at Doubled Quantities Difference in LABOR-HOURS Per Unit at Doubled Quantities Rate of Improvement (%) Slope of Curve (%) 1 100,000 2 80,000 20,000 20 80 4 64,000 16,000 20 80 8 51,200 12,800 20 80 16 40,960 10,240 20 80 32 32,768 8,192 20 80 Obviously, the amount of labor-hour reduction between doubled quantities is not Find Each Product's Direct Labor Cost per Unit . It refers to the wages paid to workers whose duties enable others to produce goods and perform services. You can view the following video by Nick Veros on " pricing garments". 95 per hour Truck Dri v er $2. These figures are then multiplied by actual units sold i. 80 per unit. 6 hours of labor at a labor rate of $8. In most projects, labour costs approximately 25 to 35% of the total project costs, with materials taking the rest. The level of costs for the delivery of goods 1 and 4 will be 10%, 2 and 3 - 15%. For example, ABC Company has total indirect costs of $100,000 and it decides to use the cost of its direct labor as the allocation measure. However, indirect expenses are incurred and paid off aggregately, which is why the total bill arrives annually or monthly. This metric includes workers’ wages and any additional costs of moving a product through production to sell. Cost forecast = Variable cost per unit x Activity units + Fixed cost Cost forecast = 10. Therefore, productivity is equal to 800/900 = 0. 00 per hour 7. The direct labor efficiency variance may be computed either in hours or in dollars. Related Courses. Labor (117) The unit labor cost is derived by multiplying bare labor-hour costs for Crew C-14C by labor-hour units. Enter total hours worked and what each team member is paid hourly. Compute the total product cost per unit under variable costing if 30,000 units had been produced. 80 per unit (calculated as $136,000 of total conversion costs divided by the 20,000 units produced). This can be very deceptive when each unit consumes its share of overhead, maintenance, machine wear, raw material, etc. 0. 00 per pound $2. 125. Speciaty’– 0. This formula will give you the labor cost of a project for your crew. Since hospital salaries are about 35 to 45 percent of total hospital costs, it’s important to make sure this investment is worthwhile for the hospital. 15 hours × $6. 21 = $27. Total Direct Labor Hours. Framer: $25+ $2. Total value added is equivalent to revenue less intermediate consumption. 25 hours and the standard labor cost per hour is $18. where V is the volume per tree, m 3, and T is the time per tree, hr. This number can be provided as a standard base prior to adding the costs of materials and other factors that are known to change on a project by project basis. The standard labor cost per unit of Modex company is therefore $58. The formula for marginal costs can be expressed as follows: Marginal Cost = Change in costs / Change in quantity Formula for calculating unit labour costs is: Total labour cost ÷ total level of output. Per-Unit Price = (Monthly Overhead Costs / Total Units Sold) + Current Price Per Unit. What are the key factors that determine unit labour costs? Rate of change of wages in the labour market. Multiply the variable costs for one unit of product by the total number of units produced. Total standard DL cost = Standard hours for actual production x Standard rate per hour 2. total unit product cost = direct materials + direct labor + variable overhead Therefore $15/120 = $0. 9/hr Calculation of Cost Per Unit: The formula for computing the cost of each service unit (i. If you want to know direct labor cost per unit, divide total direct labor costs by the total amount of units of goods produced during the period. Labour cost recorded = 5,050 hrs @ Rs 35 . 00: Packing, Hauling & Marketing: ton: 12: 180. Nominal unit labour cost fell again from 2014 to 2016. iii) Differential Piecework. 68 ($16. 56 + ($5,650/10,000) = $6. 50 Total standard unit cost $ 54. ADVERTISEMENTS: How to Calculate Labour Cost: Per Hour, Per Unit, Techniques and Formula! Techniques of controlling labour cost can be effectively used by coordinating the activities of various departments concerned with the labour, namely: (A) Personnel department ADVERTISEMENTS: (B) Engineering and work study department (C) Time keeping department (D) Pay roll department, and (E) Cost […] For determining the labour cost per unit production, we required to know the time consumption of per unit first. This final number is your restaurant’s labor cost percentage. Unit labour costs and their components The unit labour costs (ULC) indicator is considered one of the best complementary indicators on an economy and as such is used relatively frequently (in particular by foreign institutions) in evaluating the economic development of indi- Crew’s hourly rate X 3 (amount of workers) X 6 (number of weeks) X 40 (hours per week) = Cost of the project. 00 AH 1,150 X SR $9. This yields price per unit of $6. “Stand around” time is a nicer symbol of employee downtime, since human employees are never 100% productive. a) Calculate Sam’s pay per week. Total Variable Cost = Total Quantity of Output x Variable Cost Per Unit of Output . Conversion costs equal to $55,000+$66,000= $121,000. The total manufacturing overhead of $50,000 divided by 10,000 units produced is $5. 21. 2. e. This number can be provided as a standard base prior to adding the costs of materials and other factors that are known to change on a project by project basis. However, in direct labor cost calculations, companies The amount of allocation charged per unit is known as the overhead rate. 1 "Standard Costs at Jerry’s Ice Cream". 21 = $17. It is also incredibly helpful if you have a benchmark figure which is based on the period. For example, if a company’s total direct labor cost for one hour is fifteen dollars and it expects to utilize 0. 00 Engineering $100,000. We can say that Labour/Labor cost is influenced by two factors, The time for which labour/labor is engaged. " In order to calculate their per unit contribution margin, we use the formula in Figure 3. 03 per hour Note: General foreman and foreman are dead weight since they do not work with their tools; however they must be considered and charged to the composite crews. 36) from the Calculate the standard cost per unit for direct materials, direct labor, and variable manufacturing overhead using the format shown in Figure 10. Labour costs . The bare labor-hour cost is found in the Crew Section under C-14C. The cost of labor is broken into direct Standard cost per unit = £2 Standard cost for actual output = £2,400 Actual cost for actual output = £2,850 Difference = 2,400 – 2,850 = £450 more than standard (therefore Adverse) Direct Labor Efficiency Variance is the measure of difference between the standard cost of actual number of direct labor hours utilized during a period and the standard hours of direct labor for the level of output achieved. 50 per hour. EXAMPLE: A power saw and operator cost $5. 00 Packing and shipping $60,000. For example, if the hourly rate is $16. 80. 15 hours – unfavorable. 21. 00 per hour 35. Labour. 5 is: Formula for Marginal Cost. 20 X SR $9. As such, a ULC represents a link between productivity and the cost of labour in producing output. plus ₹ 3 per unit piece rate for units Direct Labor 40,000 – variable; Utilities 22,000 – 80% variable; Materials 35,000 – variable; Total Variable Costs. In this example, it’s 60% of the total cost of doing business. 10/unit `500 labor hours, Labor rate: Rs. This percentage of total product cost will be used to calculate downtime at the machine/profit center. Calculate labor cost per item with this formula: Labor cost per item = # total units / total labor When they add up all of the labor costs for those 100 standard cleanings, ABC cleaning paid 7. 125 per unit cost. 25 labour hours reqd per unit = contribution of $414. 1 O = Ordering cost per unit C = Annual carrying cost of one unit i. 00 Overall labor effectiveness (OLE) is a key performance indicator (KPI) that measures the utilization, performance, and quality of the workforce and its impact on productivity. 50 SH 6,000 x . 61). The Employers Burden would be ($37. In interior design projects, the labour required is intensive and the tasks take longer and have to be carried out by highly skilled workmen e. 00 Variable mfg. 00 Labor 1 hour at $10. Unit labour costs. 1. Employer “Labor Burden” Cost Per Hour – This would be the additional Cost, above the Hourly Rate in which the company is responsible for. Unit labour costs Unit labour costs are often viewed as a broad measure of (international) price competitiveness. The data-set concludes with a look at labor versus non-labor costs per available seat mile. 50 B 7 (Standard Hours for actual output x Standard Rate Per Hour) – (Actual Hours x Actual Rate Per Hour) = {(250 x 80 /100) x 8} – (300 x 7) = (200 x 8) – (300 x 7) = 500 (Adverse) Labor Variance is further sub-divided into two heads: Labor Rate Variance. 5 hours on every single unit during production, then if it manufactures one thousand units per week, then its standard cost of labor would be seven thousand five hundred dollars. The sum of bid items direct costs gives the estimated direct cost of the contract. e. total unit product cost = direct materials + direct labor + variable overhead Formula Chart – AP Microeconomics Unit 2 – Supply and Demand Unit cost of A Unit cost of B = Average Revenue = Marginal Revenue = Unit price of labor Unit This percentage represents the proportion by which the amount of an input (or cost) per unit of output is reduced each time production is doubled. Direct costs required to create products and services, such as direct labor and materials, are excluded from overhead costs. 82. 0975 (only for the ongoing operation not the complete garment) Second method of calculating direct labour cost per piece. Multiply by 100. If the labor cost is $6. Simply use the total cost of variable manufacturing overhead instead. Now, the magic is, that replacing the word PER with a divisor sign works anywhere that you hear the word {PER}. ft. Labor estimate of $20 - $20. =. 00 per unit x 17. So, $ 101,250/5. 00 per pound $2. Where, Total Variable Expenses = Total variable expenses refers to all those costs incurred by the company during the period total of which change when the volume of the output or the activity changes in the company where the change in the variable expenses will be in the proportion of the difference in the output of the company. 00 x 2,000 + 15,000 = 35,000 The direct labor (DL) variance is the difference between the total actual direct labor cost and the total standard cost. yield from actual input) x Std. High percentage of labour turnover denotes that labour is not stable and there are frequent changes in the labour force. Manufacturing Overhead Receiving $20,000. Its direct material costs are $5 per unit, and direct labour costs are $5. Marginal cost (MC) is the change in total cost per unit change in output or ∆C/∆Q. 00: 390. Overhead costs include bearings, lubricant, paint, staff, and electricity ($10 per unit). Answer. Interfacing float = It is the part of the total float which causes reduction in the float of the succession activities. 08 h (4. Algebraically: q /( / ) ulc w q L= n (1) where wn denotes total labor compensation, q is physical output, and L is employment How to solve: The standard costs for a unit of product are shown below: Materials 2 pounds at $1. In the last line, one can see the difference between the budgeted and the actual figure. The labour costs are the total quarterly costs incurred by the employer in the employment of personnel. 00 per hour. They are calculated as the ratio of total labour costs to real output, or equivalently, as the ratio of mean labour costs per hour to labour productivity (output per hour). ULC represents a link between productivity and the cost of labour in producing output. To find the minimum time associated cost (i. Formula: Total number of hours spent on the production / number of pieces produced For example, in a bakery, if 2 members of staff working 8 hours a day achieve a production of 200 pieces of bread, the man hour per unit is: (2x 8) / 200 = 16/ 200 = 0. Nick goes a bit further with My initial interest is to find out a way to insert the unit cost of area, volume and labor ($/m2 or $/m3). 50 hours per unit . 5 hours 3. Overhead Variance For example, if the company used monthly rates, the rate would be high in the months when few units are manufactured (monthly fixed costs of $700 ÷ 100 units produced = $7 per unit) and low when many units are produced (monthly fixed costs of $700 ÷ 350 units = $2 per unit). You can tailor the billable hour equation to determine a per-unit price that also pays for overhead costs. As we know with the cost of man-hours, it is easy to calculate how the labor force contributes to the unit cost and the profitability of the product line. Direct labour cost = 200*6*7. 00 : Harvest: First Pick: ton: 10: 39. They made a profit of $6,875 for their standard cleaning service or 27. Unit labour costs (ULC) measure the average cost of labour per unit of output. 90 (0. During a period 60,000 units have been produced incurring a variable cost of 2,15,000 and a fixed cost of 1,75,000 in 33,000 hours over 11 days. It's a template and so can be tailored for your needs. It may be best Calculate the labor cost per unit The labor cost per unit is obtained by multiplying the direct labor hourly rate by the time required to complete one unit of a product. 5 per Unit. 9) are consistent. For both product and service-based businesses, the cost per unit is a valuable calculation to make sure their costs are lower than what a unit sells for. Your labor burden costs are $4,084 divided by 1,840 hours which is $2. total unit product cost = direct materials + direct labor + variable overhead Its fixed expenses per month might be: Labor: $1,500 Rent: $3,000 Insurance: $200 Advertising: $500 Utilities: $450 Total: $5,650. 50 / unit . Direct labor costs are the total costs incurred by workers directly working to produce goods or provide services for customers. The information needed to derive a standard labor rate includes: Employee pay rates per hour. The additional 8 hours is multiplied by the standard rate of $10 to give us an unfavorable direct labor efficiency variance of $80. Employees’ basic rate of pay per unit changes as the level of activity changes. Labor cost per item, also known as unit labor cost, is how much a company spends to produce one unit of product. Common variable costs to consider include cost of labor, cost of materials and variable overhead costs. This leaves me at a total cost per unit of $66. b) Production overhead cost per week c) Total Conversion Cost. Industry average of $35/per hour. ) Note that DenimWorks paid $9 per hour for labor when the standard rate is $10 per hour. They are calculated as the ratio of total labour costs to real output, or equivalently, as the ratio of mean labour costs per hour to labour productivity (output per hour). The consequence of this is a rise in unit labour costs. The overhead rate can be expressed as a proportion, if both the numerator and denominator are in dollars. Cost Of Labor: The cost of labor is the sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes paid by an employer. 80 x (950 – 960) = Rs. Suppose one company manufactures tires that last 15,000 miles and another company uses 10 % more labor and materials to produce Knowing that total variable costs are $5,330 and that 6,500 direct labor hours were incurred, the actual variable overhead costs per direct labor hour rate was $0. 63 per hour. Graphic designer: $1,442. This formula fails to include benefit costs, temporary worker agency costs, and “stand around” time. Add all variable costs required to produce one unit together to get the total variable cost for one unit of production. 00: 2,160. Conversion Costs = Direct Labor + Factory Overhead. Therefore, the calculation of AC is as follows, Absorption cost Formula = Direct labor cost per unit + Direct material cost per unit + Variable manufacturing overhead cost per unit + Fixed manufacturing overhead per unit. This chapter will explain the process for determining and controlling labour cost. What are the key factors that determine unit labour costs? Rate of change of wages in the labour market. Because of monopolistic exploitation, fewer units of labour (L m < L c) are used at a lower price per unit (W m < W c). Under absorption costing, a company had the following unit costs when 9,000 units were produced. If Pierre’s recipe makes 6 dozen cakes (72 cakes), the variable cost per unit would be $1. This tactic makes entry into a market by competitors difficult. The labor rate is ?25 per hour, and Five Card Draw estimated 180,000 direct labor hours. Fixed Manufacturing Overhead Budget Variance The labor cost per unit is obtained by multiplying the direct labor hourly rate by the time required to complete one unit of a product. 5 x 4 x 6) = 48 47. Formula Chart – AP Microeconomics Unit 2 – Supply and Demand Unit cost of A Unit cost of B = Average Revenue = Marginal Revenue = Unit price of labor Unit Direct labor could average out to $10 per unit, as they produce several per hour. Under absorption costing, a company had the following unit costs when 9,000 units were produced. Labour Turnover: It denotes the percentage change in the labour force of an organisation. Formulas for calculation the planed production cost of the production in Excel Formula for calculating unit labour costs is: Total labour cost ÷ total level of output. labour cost per unit of output LYV = (AY – SY) x SLC Check: Labour efficiency variance = Idle time variance + Labour mix variance + Labour yield variance (or labour revised efficiency variance) LEV = ITV + LMV + LYV (or LREV) 3. Yost Company needs to prepare a Direct Labor Budget Hackett Industries is preparing its direct labor budget How to solve: The standard costs for a unit of product are shown below: Materials 2 pounds at $1. to treat one patient or to serve one customer). labour cost per unit formula