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Product costing subsystem

OVERVIEW:
Did You Meet the Budget?

Reliable cost information to realistically set prices and control cost.
The MFG Product Costing subsystem offers all the facilities you need to calculate reliable product costs. It lets you maintain both frozen standard and current cost set; perform what-if simulations to demonstrate the impact of cost changes; interface with other modules to calculate actual labor and material costs; and swiftly produce a wide range of reports, and single-level or indented bills of material, broken by standard or current costs.

Product Costing gives you the complete picture of your production costs.



Reliable cost information is essential in the ongoing effort to maximize company profits? Serving not only the pricing function, cost data finds numerous uses throughout a manufacturing system. Cost figures help you translate inventory balances into consistent units for aggregation and provide the basis for prioritizing exceptions requiring attention. The Product Costing subsystem provides the facilities needed to calculate reliable product costs. Using part, bill of material, and routing information, MFG supports the maintenance of frozen standards, while permitting "what if" queries that demonstrate the impact cost changes. The system also maintains separate cost values for material, labor, overhead, and outside processing.

Standard and current costs.
The Product Costing subsystem maintains both frozen standard and current standard cost sets. Using the manufacturing bills of material and the routing for an assembly, the system can calculate (roll-up) the cost of the assembly from the costs of its components and any labor applied at each level. You can use either the standard or current cost fields in the calculation. Costs will roll-up or extend up for lower level parts in the assembly throughout the product structure after you have set or modified costs for parts at the lowest component level.

Getting the complete cost picture.
With the speed, simplicity, and user-friendliness characteristic of its companion subsystems, the Product Costing Subsystem provides a variety of reports by standard or current costs. Further, the subsystem will print both single-level and indented bills of material broken down by standard or current costs.

Categories and components of MFG - maintained cost data.
For both standard and current cost data, the subsystem maintains five component elements.

  • Material cost is procurement cost for purchased parts and accumulated material is the total material value of all the assembly's components.
  • Assembly labor cost is the standard labor value-added to produce one good assembly.
  • Accumulated labor cost is total labor value of all the assembly's components.
  • Outside cost is an outside vendor's processing charge per piece.
  • Accumulated outside cost is the total value of outside processing for all of the assembly's manufactured components.

The system supports fixed and variable overhead rates, and a material overhead rate. The fixed overhead is incurred by a part as it passes through each work center. For each work center, there is a fixed amount per hour. The variable overhead is accumulated as a percentage of labor costs, incurred as the part passes through each work center.

Handling cost roll-ups.
Once the bills of material have been entered, the subsystem can calculate the cost of each assembly from component costs and labor costs applied at each level. As a useful check on whether all applicable costs necessary for system-calculation of assembly cost have been entered, the subsystem shows how many lower-level parts were purchased and had no material cost, or were manufactured and had no assembly labor cost. And to inform you at any time during the manufacturing period whether individual part cost modifications have been rolled-up to higher levels, the subsystem records the date of the last cost roll-up for each part.

Actual costs.
The manufacturing system accumulates actual labor costs incurred against a work order for a part when the production activity control module is implemented. It will also calculate actual material costs if an interface between manufacturing and an accounts payable system is implemented.



Diagram Product Costing

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