Defining Material Overhead Defaults

You can define and update default material overhead sub-elements and rates. These defaults speed data entry when defining items.

When you define items, these material overheads are defaulted into the Frozen cost type under standard costing, and into the cost type you defined to hold average rates under average costing. 

For buy items, enter material costs. For make items, roll up costs. You can specify an organization and category default for the same material overhead sub-element. When you have multiple defaults for the same sub-element, the category default takes precedent over the organization default. If you have two category level defaults, the default that matches the item's planning code takes precedence.

Prerequisites:

You must be in the master cost organization to define material overhead defaults.

To define material overhead defaults:

1. Navigate to the Material Overhead Defaults window.

2. Select a default level for the material overhead sub-element and rate. The options are by organization or by inventory item category.

3. If you select category as the default level, select an item category. 

4. In the Cost alternative region, select a material overhead sub-element to assign to the current organization or category. You can enter a material overhead sub-element more than once. For the same material overhead sub-element, material overhead rates you assign to a specific category override any material overhead rates you assign to an organization.

5. Select the item type: make items, buy items, or all items. The system applies the default material overhead based upon an item's planning code. This determines the material overhead sub-elements and rates for items for items you purchase, manufacture, or for all items. Within a category or organization, if the value you enter for Item Type matches the item's Make or Buy item attribute, the system uses the material overhead information associated with it instead of the information you enter for the All items value.

6. Select an activity. You can associate the sub-element with any activity.The default is derived from the default activity you assigned when you defined material overhead. 

7. Select a basis. The default is the value you entered for the default basis when you defined overhead. 

Activity: Directly associate the activity cost with the item. 

Item: Assign a fixed cost per item. 

Lot: Assign a lot charge to items and operations. 

Resource units: Charge overhead by multiplying the overhead amount by the number of resource units earned in the routing operation. 

Resource value: Charge overhead by multiplying the overhead rate by the resource value earned in the routing operation. 

Total value: Charge overhead by multiplying the total cost of the item, less material overhead earned at this level, by the material overhead rate.

8. Enter the rate or amount for the material overhead as appropriate for the basis. Material overhead sub-elements with basis types of Total value and Resource value are usually defined as rates; those with basis types of Item, Lot, Activity and Resource units are usually defined as amounts.

9. If you select Activity for the basis, open the Activity alternative region and:
Enter the number of activity occurrences for the current costing period, i.e., the total number of times this activity is performed during the current costing period.
Enter the total number of items you expect to be associated with the activity during the current costing period, i.e., the total number of units that flow through the activity during the same period.