Rework expense in SDW

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Aug 6th, 2022
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How to rework expense in SDW

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- Welcome to REWORK, a podcast by 37signals about the better way to work and run your business. Iamp;#39;m your host, Kimberly Rhodes. Itamp;#39;s no secret (upbeat music) that businesses have to watch their spending in order to be profitable, but these days we hear about all kinds of companies that just arenamp;#39;t profitable. Companies that are losing tens of millions of dollars each year, but continue to spend as if it doesnamp;#39;t matter. Thatamp;#39;s not how Jason Fried and David Heinemeier Hansson, the co-founders of 37signals, have chosen to run their business, and very likely, itamp;#39;s not how you can run your small business either. Jason and David are here with me this week to talk about the need to care about costs in your business. Iamp;#39;m calling this episode, itamp;#39;s time to care about costs. But I have a feeling, guys, you guys are gonna say itamp;#39;s always time to care about costs, but thatamp;#39;s like not what people are doing, not what com

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Rework is when you pay twice or more to get the same output. If a widget costs $. 25 to make and you had to do it twice to get it right, then your cost just went up to $. 50 and most likely you didnt make money on that widget.
One way to estimate the cost of rework is to use a simple formula that multiplies the rework percentage by the total project cost. The rework percentage is the ratio of the rework hours to the total project hours. For example, if your project has 1000 hours of work and 100 hours of rework, the rework percentage is 10%.
Rework costs: Rework costs are incurred when defective products or processes are identified and need to be fixed or modified to meet the quality requirements. For instance, if a product is found to have a manufacturing defect during quality control, it may need to be reworked or repaired before it can be sold.
Construction Rework Statistics However, they noted that, only taking into consideration direct costs or reported rework, a more realistic estimate is 9% of the total project cost when you factor in both direct and indirect factors. Becht, meanwhile, viewed that between 2% and 20% of total costs could account to rework.
Total cost (TC) in the simplest terms is all the costs incurred in producing something or engaging in an activity. In economics, total cost is made up of variable costs + fixed costs. Variable costs (VC) are costs that change based on how many goods you buy or how much of a service you use.
Lets illustrate rework cost with an example. Consider a project with a $10,000 fee. Of that $10,000, $9,000 may be planned to cover costs (salaries, contingency), resulting in $1,000 profit. Should this project incur just 5% rework, the cost increases to $9,450 ($9,000*1.05), and the profitability is reduced to $550.
Rework is the cost of fixing a product that does not meet the required quality standards. Manpower is the cost of the additional labor required to correct the quality issue.
REWORK AS A FACTOR IN INCREASING PROJECT COSTS As a rule, it takes 30-50% of the total effort. It includes fixing technical errors or working with missed requirements.

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