ANS-0676 · INVENTORY & ITEM MANAGEMENT
How to Track Labor Expenses and Add Them to NetSuite Assembly Item Costs
NetSuite allows organizations to define manufacturing charge items to accurately capture and allocate labor and machine costs within production processes.
Short answer
To track labor expenses and include them in assembly item costs, define a manufacturing charge item in NetSuite. This involves setting up an item record, checking the 'Manufacturing Charge Item' box, assigning a cost category, and defining an hourly rate. These charges are then integrated with manufacturing routings to accurately reflect production costs.
Scenario
Organizations often need to accurately account for labor and machine run time expenses incurred during the manufacturing of assembly items. The challenge lies in integrating these operational costs directly into the final selling amount or cost of the assembly item, ensuring comprehensive cost tracking and profitability analysis within NetSuite.
Solution
NetSuite's manufacturing routing functionality allows for the definition of manufacturing charge items to track and allocate costs associated with specific routing operations, such as labor or machine run time. These items enable the recording of hourly costs for activities and the expense accounts against which these charges are logged.To define an item as a manufacturing charge item:
Go to Lists > Accounting > Items > New.
Click a link to create a charge item. Routing charges and expenses can be tracked using the following item types: * Other Charge for Purchase * Service (for Purchase or for Resale)
Enter a name, such as "Machine Run Time Cost".
If NetSuite OneWorld is in use, select a subsidiary. Note: A manufacturing charge item can be associated with only one subsidiary.
On the item record, check the Manufacturing Charge Item box. Note: The Manufacturing Charge Item box cannot be cleared if the item is included in a cost template.
Once the Manufacturing Charge Item box is checked, select a Cost Category in the field below. Note: The cost category cannot be changed if the manufacturing charge item is included in a cost template. Only manufacturing charge items can use the labor and machine cost categories.
Define an hourly rate in the Purchase Price field, up to 7 decimal places. Note: Charges are based on hourly rate (Amount/Hour).
Click the Accounting subtab.
Select the expense account against which these hourly charges should be logged.
Complete any additional necessary fields.
Click Save.
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