Defining Item Costs

 Define costs for buy items or enter additional costs for assemblies with costs generated from the cost rollup.

If you share costs, you can only define costs in the cost master organization. When you define an item, the system creates a cost record according to the costing method, the Frozen or Average cost type. You can modify the Frozen cost type if no inventory transactions have occurred, allowing you to directly set the frozen standard cost for the item. If inventory transactions have occurred, you must define a cost in a cost type other than Frozen and perform a cost update to load a frozen cost for the item.

You cannot use the Item Costs window to edit average costs. See: Updating Average Costs.

For Bills of Material users, you can use the costs in any cost type for the costed bill of material explosion reports to examine other cost scenarios.

Suggestion: If you use Bills of Materials, and intend to use the resource, outside processing, and overhead cost elements when you define item costs, you must first define bill parameters to have access to material and material overhead cost elements. See: Defining Bills of Material Parameters.

   To define item costs:

1. Navigate to the Item Costs window. Do this by choosing the Costs button from either the Item Costs Summary folder window or from the Item Costs Details window. See: Selecting An Item / Cost Type Association. See: Defining Item Costs Details.

If you are defining an item cost in a cost type other than Frozen, the existing cost information is copied from the default cost type to the current cost type. You can use this cost information or modify it to create a new cost for the current cost type. If you use the average cost method, you can create budget or simulation costs here. You cannot edit average costs from this window.

2. Enter the cost element. If you are defining a frozen cost for your item, a row is inserted for any applicable default material overhead sub-elements you defined.

3. Enter the sub-element. For material cost elements, the default is the material sub-element you defined for the current organization.

4. Enter the activity. The default activity you associated with the sub-element is the default.

5. Enter the basis. The default is the default basis associated with the sub-element.

6. If you choose a basis type of Activity for a material overhead sub-element, enter the following:

• the number of times you expect the activity to occur for the current item during the period the costs are in effect

• the cumulative quantity of the item passing through the activity during the same period.

7. Enter a percentage rate or a fixed amount, as appropriate for the basis.

Cost information for the current item and cost type combination is displayed:

• The basis factor is the amount or quantity the rate/amount is multiplied by to calculate the unit cost of the sub-element. The basis factor for sub-elements with a basis type of Item is always 1. The basis factor for sub-elements with a basis type of Lot is the ratio of 1 over the item's standard lot size. The basis factor for sub-elements with a basis type of Activity is the ratio of activity occurrences over number of items. The basis factor for sub-elements with a basis type of Resource Units is the number of resource units earned on an assembly routing. The basis factor for sub-elements with a basis type of Resource Value is the extended value of the resource earned on an assembly routing. The basis factor for sub-elements with a basis type of Total Value is the total cost of the item, less any this level material overhead.

• The manufacturing shrink factor (the multiplier used in the unit cost calculation), which uses the following equation: