Applying Additional Costs to Production (e.g. Labor and Overhead)

Welcome to the home page for everything related to applying additional costs in production

The help content found here will show you how to set up the items needed to factor in different types of costs associated with each step of your production processes.  To understand the basic process from start to finish, click on the link below to expand and view the help videos.

Below are some common questions related to setting up and calculating additional costs in the production process

How can OBeer account for overhead, labor, utilities, etc. using recipes?

This is done by setting up one or more non-inventory "Overhead Items" (labor, utilities, depreciation/Amortization, yeast generation, etc.).  These items are then added to the Bill of Material (BOM) for any production step in which you want to factor in an additional cost.  Keep in mind that you can capture as much production detail in OBeer for overhead as you would capture in the real world, but how complex you want to make it is up to you.  

How do I break out my costs into an Overhead item?

If you have that detail in your actual costs, you could setup overhead items accordingly in OBeer (Overhead Brew Labor, etc.).  For example, with payroll costs, some customers choose to split these between the brewery, cellar, and packaging payroll.

You set these overhead items up as standard cost, non-inventory items, and then add them to the BOMs they are associated with.

Most common is to set the standard cost for the overhead item based on the amount produced (e.g. number of barrels).  In this case, brewing a 100 BBL batch should accrue $500 in labor.  You would setup the Overhead Brew Labor item with a standard cost of $5, then add it to the BOM with a quantity of 1 unit per barrel produced, or $500 per 100 barrels produced.  If you end up brewing more or less beer, your labor is adjusted proportionately (i.e. if you knock out 105 BBLs, you will have $525 in labor).

Since labor costs for cellar and packaging would be different than that for brewing, you can set those at a different per BBL rate.  Using the example above, you would still associate it with the amount produced so that if you filter/package more beer, you accrue more costs.  On your packaging BOM, for instance, you might add $7 per barrel packaged or $700 per 100 barrels packaged.  

If you would like to add even further complexity, you can have packaging line specific labor (i.e. bottling labor vs kegging labor), which is common if you have totally different costs per BBL on those different packaging lines.

General Overhead (Utilities, etc.)

These items are setup the same way, just with different rates per BBL based on your actual estimated usage.  In order to determine what to add to the BOM, someone with access to the overhead costs can relay this information to the production staff (if they don't already know this information, anyway) and non-inventory expenses such as utilities, rent, general maintenance, etc. can be added to the BOM as appropriate.

Why Not Just List Actual Labor Hours Rather Than Per Barrel Costs for Labor?

You have the option of making these non-inventory items as "manual" (rather than to automatically "backflush" per batch) and processing each line of the overhead/labor items the same way you would all other manual items (e.g. raw materials).  If you attach your labor hours on each Bill of Material, then "manually issue" the labor for that brew, you would then fill in the actual number of hours used (just like you would manually issue the # of pounds of malt, hops, etc.).  This would accrue the specific cost per batch produced.

For some this might be feasible, for others it might be too difficult to truly capture the time spent on each batch.  It's not uncommon to have one batch start before another is finished, so tracking this labor could be more difficult.  The method mentioned above, where labor is set as a standard cost and backflushed for each batch, requires no additional work whereas tracking actual labor hours requires the staff to track these hours and then someone to manually collect/document the number of hours in OBeer for each batch.

If tracking hours is not feasible in this manner, we suggest backflushing labor directly to the number of barrels produced.

What do other breweries do?

Smaller breweries might track hours manually whereas most of our larger customers prefer the "per barrel" backflush method as described above.  The backflush method is how the world's largest breweries do it, as the tracking and documenting of hours becomes extremely difficult, if not impossible at times.

Do I need to use more that one non-inventory item to track additional costs in the production process?

How complex you decide to make the non-inventory item is up to each client.  You could use one non-inventory item for labor and another for all overhead if you want to keep it simple.  If you want to build out more complexity/tracking abilities, you could create multiple labor and/or overhead non-inventory items and associate them respectively. 

The degree of complexity with your additional costs is also dependent on the depth of detail you're able to obtain on specific costs.  For example, if you wanted to factor the cost of water, you'd want to make sure you know the approximate $ cost per gallon or per barrel, which ever is more accurate.