Digital Printing Hourly Rate Costing Method II

The composition of hourly rates

The total production cost is divided by the production time that should be charged, and the resulting value is the hourly rate. The total cost of production consists of many cost items. It includes equipment costs, production site occupancy costs, direct labor costs, management fees, and other overhead costs. Some of the above costs are direct, some are indirect, some can be easily identified and included in the cost accounting center; some need to be reasonably simplified before they can be assigned to the cost accounting center. It must be clear that direct costs are only part of the hourly rate. Sometimes, some indirect costs are even greater than direct expenses. Indirect expenses are usually fixed and will not generally increase or decrease during the operation of a company. In most cases, indirect costs are allocated to cost centers and included in hourly rates. Otherwise, all costs will not be recovered through the pricing of jobs.

Equipment Cost Equipment costs or equipment-related costs are called cost of ownership. It includes equipment depreciation expenses (in terms of purchased equipment), rental costs, maintenance costs, electricity costs, equipment insurance costs (such as fire or accident insurance), as well as the relevant taxes and fees imposed by the government. Equipment depreciation or rental costs directly correspond to each device.

Occupied Cost of Production Site According to whether the site used by the printing company is company or leased, the cost of occupation is not the same. If the site is the company's own, site occupancy costs include factory depreciation charges, mortgage payments (if any), housing usage fees (such as utilities, heating and air conditioning, sewage charges, etc.) and house and site maintenance fees. If the house used is rented, the cost of housing occupation includes rent and the corresponding above-mentioned expenses (according to the terms of the rental agreement manufacturers need to pay). After the cost is determined, the cost is divided by the square meter of the total occupied area to get the cost per square meter. The occupancy cost of the cost center is obtained by multiplying the square meter occupied by the cost center (including sufficient working equipment for the workplace) by the occupancy cost per square meter.

Labor cost refers to labor or labor-related costs, including direct wages of employees who perform productive labor, taxes and subsidies related to wages, and indirect labor costs (including shipment, receipt, shipment, storage, and other support for print production. However, it is not possible to classify the indirect charging costs and management fees of printed jobs. Direct wages or direct labor costs and their associated payroll taxes and various subsidies should be allocated based on the percentage of time workers spend working in a cost center.

Indirect labor costs, including indirect labor wages, payroll taxes, and various subsidies, can only be included in the cost center of the related indirect labor. For example, the labor costs of transporting materials from the warehouse to the printing room should be included in the printing cost center. According to the method of calculating indirect labor costs, management costs are included in the corresponding cost centers. The wage costs such as salaries, salary taxes, and subsidies for printing shop managers can only be included in the cost center of the printing shop. The salary cost of the manager who manages the entire plant business shall be included in all cost centers of the whole plant.

Indirect production costs There are some costs that cannot be directly allocated to various costing centers. Although these expenses do not directly support a cost accounting center, they are actually the actual cost of the printing company. These factory-wide or indirect production costs must be included in the hourly rate of the cost center in order to obtain the company's overall balance of payments. In general, these costs should be calculated according to the distribution percentage and be allocated to each cost center with the same standard.

Total Cost of Production The total cost of production of the center is obtained by adding all relevant costs in each cost center. The total production cost is divided by the payable production time for a particular job. The resulting value is the estimated hourly rate for each cost center. If a printer uses a printed page or unit pricing method, the total production cost is divided by the expected production volume of each cost center and the estimated unit rate is obtained.

Hours Charged By definition, the number of hours that should be charged is the time required to produce a user's print job. This part of the time requires the user to pay a fee that will be used to balance all costs. Non-pay items that should not be paid by users include equipment maintenance, training and staff meetings, reprints of scrap or unqualified products, and lost time due to lack of work. For a typical single-shift printing plant, the chargeable time only accounts for 75% of all working hours. At this time, 75% of the number of working hours (this is the time that someone operates the equipment and can be used to produce the job) should be used to calculate the hourly rate.

This final calculation will be used to project the hourly rate. But this is not the final result. There are also some non-productive costs that should also be taken into account. Sales, customer service, and general management fees can increase the total cost significantly. Digital printing equipment must also take into account project development costs.

(to be continued)