Cost Details Basic Data

General

Cost details in Cost Details Basic Data enables you to see the unit cost of an inventory part broken down into greater detail. This enables analysis as well as posting control possibilities at a more detailed level. You could also use cost details for pricing purposes when using cost-plus contracts.

Cost detail information includes:

• The type of cost (e.g., material, labor, etc.): This is defined by the system parameters Cost Bucket and Posting Cost Group.
• Origin of the cost (e.g., a department that performs work): This is defined by the system parameter Cost Source.

If you have set up the required basic data when a cost occurs, the cost detail information will be created and displayed in a cost structure. The cost structure consists of  the following fields: Cost Bucket, Posting Cost Group, Cost Source and OH Accounting Year. It is the inventory part unit costs, inventory values, inventory transactions and manufacturing transactions that will display cost details in a cost structure. In case of manufactured parts, the shop order will collect all costs connected to the order and create the cost details for the manufactured part. This is illustrated by figure 1 below:

Figure1

Notes:

• If you have not installed IFS/Costing, cost details will not be created. The Cost Bucket, Cost Source and OH Accounting Year fields will display an asterisk sign (*), and the Posting Cost Group field will be empty.
• Even if you install IFS/Costing but have not set up the basic data for cost details, inventory part unit costs will be broken down into the cost bucket level of detail (Cost details will always show a value in the Cost Bucket field, because the unit cost will at least include one cost bucket for material). Other details will be shown only if you have set up the basic data for cost details.

Cost Bucket

Cost buckets mentioned in cost detail tables are the same as cost buckets used in IFS/Costing. They define how part costs are displayed in the system and combines other lower level cost details. When cost details are generated for a part, the cost template in costing will be the base for setting the cost bucket for that transaction.

Posting Cost Group

The posting cost group is a user-defined grouping of cost buckets used to create postings for a part. It is a control type in posting controls which is valid for a lot of posting types. You must first define the posting cost groups, and then connect them to cost buckets. The most common case would be to group the buckets into logical categories like material, delivery OH (overhead), labor, labor OH etc. But you could choose to group the buckets in other ways. For instance, you can group all buckets related to material (such as material, delivery OH and material OH) into one group.

It is optional to use posting cost groups. If there is no posting cost group set up, the Posting Cost Group column will always be blank. If you want, you can set the basic data to make it compulsory to use posting cost groups in the system. If this is done, you will always have to connect a cost bucket to a posting cost group.

Cost Source

The cost source can be seen as the origin of the cost. All cost sources are user defined. For labor costs, the cost source could be a department where work is reported; for material costs, it could be a grouping of inventory parts. Costs can arise during a defined number of situations known as cost types. For each of these situations there are a number of valid cost source indicators. First you must decide the the indicator to use for a specific cost type. Then the indicator must be connected to the cost source defined by you.

Example:

• When reporting labor directly through a shop order, a labor cost will occur. So you might consider Shop Order - Labor as a relevant cost type.
• In the cost source set up, you can choose to use one of a number of valid cost source indicators (labor class, work center, site etc). If the company wants to follow up on its labor costs per department (labor class), you might need to enter each department as a cost source.
• You should then connect a suitable cost source indicator to the cost type as well as cost source.

However valid combination of cost source indicators are as follows:

Note: A fixed cost source must be specified only if the cost source indicator is fixed value.

It is optional to use cost sources. If there is no cost source set up, the Cost Source field  will always show an asterisk sign (*). If you want, you can set the basic data to make it compulsory to use cost sources. This will make it impossible to receive a part without having a valid cost source on all cost details.

The Cost Source parameter is also a control type in the posting control valid for a lot of posting types.

OH Accounting Year

The OH accounting year is the financial year when an overhead cost had been applied. This parameter is only valid for the overhead details and it is used for periodic overhead adjustments.

It is optional to use the OH Accounting Year. If there is no OH accounting year set up, the OH Accounting Year field  will always show an asterisk sign (*).

Creation of Cost Details

Cost details for inventory part unit costs may be created through:

• Purchase order receipts
• Shop order and production schedule receipts
• Direct receipts into inventory (including the different functions of a work order to move parts into stock)
• Calculations in costing (Only valid for standard cost per part)

As mentioned earlier, when a cost occurs the cost detail information will be created and displayed within a cost structure, which may include the Cost Bucket, Posting Cost Group, Cost Source and OH Accounting Year fields.

When cost details are created through a shop order or production schedule:

• If the valuation method is weighted average (valid for all cost levels) or if cost level is set to cost per serial: An actual value for that shop order will be calculated based on issued components, reported machine and reported labor. This calculated cost will be subsequently used for shop order receipt transactions. Note: If several partial receipts are done for the same shop order, all receipt transactions will get the same weighted cost, i.e., a weighted average of the total cost for that specific shop order. It should be noted that the initial calculated cost will be based on the estimated value where cost source=*. On closing the order the calculated cost will be based on the actual value including the correct cost sources. The estimated cost with cost source = * is used to reduce the number of reversal transaction during revaluation when the shop order closes. In addition, using specific cost sources instead of * would be misleading since the cost sources used in the revaluation will be based on those in the actual transactions which could differ from historical values.
• If the valuation method is FIFO/LIFO, the system will propose a cost structure based on what has been issued and reported so far. You can modify this structure before receiving the parts.
• If the valuation method is standard cost and the cost level is cost per condition or cost per lot batch, the system will calculate a cost structure based on the issued material and reported labor and machine costs.

When cost details are created through purchase order receipts and direct receipts into inventory:

• In some valuation methods a new cost detail structure will be generated at each new receipt, while in other inventory valuation methods the existing cost structure in inventory will be used. When cost details are generated through a purchase order receipt, the purchase order price will be seen as the material cost; the cost template in costing will decide which material bucket to use and if delivery overheads should be added.
• When details are created through a direct receipt into inventory, you will have to manually define the cost structure. The system will only propose a cost structure based on the cost structure of the part in stock, or any previous transactions for that part.
• When using standard cost per part, the cost structure could be set by copying a cost structure to cost set 1 in costing.

Standard Cost and Cost per Part

When using standard cost per part, cost details will be created and the cost structure set, either

• By the first receipt for the part when a calculation in costing is performed
• When an estimated material cost is entered.

Note: For manufactured parts, a calculation in costing must be performed before registering the first shop order receipt.

When standard cost per part is used, the cost source and OH accounting year cannot be included in the cost structure. These fields in the cost details tables will show an asterisk sign (*).

Standard Cost and Cost per Condition or Lot Batch

When standard cost per condition or lot batch is used, the first receipt with that condition or lot batch will determine the cost structure for that specific condition or lot batch. If there are no parts in stock with that condition or lot batch, any receipt performed will be considered as the first receipt and a new cost structure will be generated. This is the case even if the condition or lot batch had existed in stock prior to this receipt, but the parts are not in stock at the moment.

Cost per Serial

Each receipt will be handled as a new receipt and new cost details will be created for every receipt.

Weighted Average and All Cost Levels

A new cost structure will be defined for each new receipt, and then a new weighted average will be calculated for the parts in stock (The inventory part cost level is considered in this calculation). A new weighted average value will be calculated for each of the cost details. This is illustrated by the example below:

1) We have 10 units in stock with the following cost structure:

2) Then 10 units are received with the following cost structure:

3) New weighted averages are calculated per detail, resulting in the following cost structure for the 20 units in stock:

FIFO/LIFO

Each receipt transaction will determine its own cost detail record in the FIFO/LIFO pile.

Posting Control

Since both the posting cost group and cost source are control types in the posting control, it will be possible to perform financial control based on these details. An inventory transaction's cost details will be stored separately. This will be the case even if no basic data for cost details are set up.

The postings are created based on the cost structure and cost details information. The usual case is that only one pair of postings is created per transaction. If you have set up cost details, one pair of postings will be created per combination of posting cost group and cost source. This is illustrated below for the transaction cost of a material requisition issue (INTSHIP) for 1 unit.

• Example without a cost detail setup:

Notice that if there is no cost source setup, the Cost Source field of cost details for the transaction shows an asterisk (*). But the Cost Source field on the posting lines will be blank.

• Example with cost details setup: