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Part BOM and Costing Issue

I have an assembly part that is not rolling up correctly and it is causing a huge Production Quantity Variance. Pic 1 shows labor in the manufacturing Routing Tab. It should appear on the (Pic 3) Costed bill of Material Unquiry under Conversion cost. Because it does not, I had to go into the Item location configuration (Pic 2) and add material plus labor. But this is a temp fix. It should be updating as prices get updated in the system after I roll up. Is this perhaps a set up issue?

This item is a sub assembly of another assembly item so this manual cost update will be incorrect it is not tracked and updated accordingly.

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