Background: Item Cost Maintenance
Use the Item Cost Maintenance (ICM) program to enter and change item costs per branch in base currency. See Road Map for work flow.
This topic has these subtopics:
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Standard Unit Cost
The Item Cost Maintenance program displays an item's standard unit cost (Total unit cost). Cost inquiries and reports use standard unit cost to provide a comparison with actual and average cost.
For a component, standard unit cost is usually the item's material cost, but may also include overhead.
For a parent item, standard unit cost is the sum of the material of the item's components and the labor, overhead, and outside service costs to make the parent.
All costs are calculated and displayed in the item's stocking unit of measure and the base currency that you selected during database conversion or installation. You cannot maintain an item's standard unit cost directly.
Important!
If an item's status code indicates that it is not to be included in cost
rollups, the item's unit cost is effectively frozen.
Incremental Costs
An incremental cost is incurred during the manufacture of an item.
For a new component that you purchase, you should enter its initial unit cost in the Incr matl cost field. If you want to assign overhead to this item, select one or more overhead codes.
For a parent item or subassembly that you manufacture, you should not enter incremental material, setup, labor, overhead, and outside services costs in this program. The Standard Cost Rollup (MCR) program accumulates these costs based on the item's bill of material and routing. Incremental run costs are system-calculated to be the difference between the incremental labor costs and the incremental setup costs..
Actual Cost
If you selected the Update actual and average costs? option in the System Options Maintenance (XM) program (Inventory Control Options), these programs update the Actual cost field:
For items you purchase, the Receiver Maintenance (IRC) or Receiving and Inspection (IRI) program updates the actual cost using the purchase order cost. However, if the vendor's cost is in a foreign currency, the system converts the PO cost to your base currency, using the Selling exch rt field in the Currency Codes Maintenance (TCU) program.
The AP Invoice Register run from the AP Invoice Entry (NE) program updates the actual unit cost when the invoice cost is different from the PO cost. This typically occurs when there are surcharges that you want to include in the item's actual cost.
If you use the actual cost method for landed costs, the Receiver Maintenance (IRC) or Receiving and Inspection (IRI) program calculates the actual cost and the Landed Cost Register run from the Landed Cost Entry (NLCE) program updates it.
For items you make, the Manufacturing Order Close (MJC) program updates actual cost for an order, include material, labor, overhead, outside service costs and adjustments, divided by the quantity completed.
For a workorderless item, the Receiver Maintenance (IRC) or Receiving and Inspection (IRI) program updates actual cost at time of receipt. The program uses costs from the Item Cost Maintenance program:
Total material cost |
(Material cost of component 1
x Quantity used) + |
Total actual cost |
Total material cost + (Incremental labor cost of parent x Quantity received) + (Incremental overhead cost of parent x Quantity received) + (Incremental outside service of parent x Quantity received) |
Unit cost |
Total actual cost / Quantity received |
All costs are calculated and displayed in the item's stocking unit of
measure and the base currency that you selected during database conversion
or installation.
If you did not select the Update actual
and average costs? option, you can click the Other
cost button to update the Actual
cost field manually.
If you selected the Apply addl costs with branch transfers? and Upd item's act/avg cost with xfer costs? options in the System Options Maintenance (XM) program (Inventory Control Options), the Receiver Maintenance (IRC) or Receiving and Inspection (IRI) program updates the Actual cost field to include associated costs, such as freight and duty.
Average Cost
If you selected the Update actual and average costs? option in the System Options Maintenance (XM) program (Inventory Control Options), the system recalculates the Average cost field each time you receive a purchase order or close a manufacturing order.
If you did not select the Update actual and average costs? option, you can click the Other cost button to update the Average cost field manually.
All costs are calculated and displayed in the item's stocking unit of measure and the base currency that you selected during database conversion or installation.
Purchased Item
For a purchased item, average cost is: (((Quantity on hand + Floor stock quantity) x Current average cost) + (Quantity purchased x Purchase order line unit cost)) / (Quantity on hand + Quantity purchased)
If the purchase unit of measure is not the same as the stocking unit of measure the cost and quantity are converted using the purchase order line unit of measure conversion factor.
At receiving, the system converts the vendor's PO cost to your base currency, using the Selling exch rt field in the Currency Codes Maintenance (TCU) program.
Single Unit of Measure Example
Suppose we buy and stock paint in one-gallon cans. We purchase 10 one-gallon cans at a cost of $20 per can.
Quantity purchased = 10 gallons
Current actual cost = $20 per gallon
Quantity on hand = 10
Current average cost = (10 x $20) / 10 = $20.00 per gallon
Suppose we purchase another 15 gallons, but the cost went up to $25 per one-gallon can.
Quantity purchased = 15
Current actual cost = $25 per gallon
((Quantity on hand x Current average cost) + (Quantity purchased x Current
actual cost)) / (Quantity on hand + Quantity purchased)
Current average cost = ((10 x $20) + (15 x $25)) / (10 + 15) = $23.00 per
gallon
Unit of Measure Conversion Example
Continuing on from the previous example, suppose that we use 9 gallons of paint.
Quantity on hand = 25 - 9 = 16
Current average cost = $23.00 per gallon
To get a great price break, we buy paint in 55-gallon drums. We enter a purchase order for 2 drums at $900 per each. The system converts the quantity ordered to the stocking unit of measure. In this case, the order is for 110 gallons.
Quantity on hand = 16
Current average cost = $23 per gallon
Quantity purchased = 110
Current actual cost = $1800 / 110 = $16.36 per gallon
((Quantity on hand x Current average cost) + (Quantity purchased x Current
actual cost)) / (Quantity on hand + Quantity purchased)
Current average cost = ((16 x $23) + (110 x $16.36)) / (16 + 110) = $17.21
per gallon
Manufactured Item
When you run the Manufacturing Order Close Register in the Manufacturing Order Close (MJC) program, average cost is: ((Quantity on hand - Quantity completed) x Current average cost) + (Quantity completed x Current actual cost) / Quantity on hand
Suppose that you have these quantities and costs:
Quantity on hand = 10
Quantity completed = 5
Current average cost = $2.00
Current actual cost = $3.00
In this example, average cost is calculated:
(Quantity on hand - Quantity completed) x Current average cost)
10 - 5 = 5
5 x $2.00 = $10.00 Total average cost of quantity on handQuantity completed x Current actual cost
5 x $3.00 = $15.00 Total actual cost of quantity completedTotal actual cost of quantity completed + Total average cost of quantity on hand
$15.00 + $10.00 = $25.00 New value of item
New value of item / Quantity on hand
$25.00 / 10 = $2.50 New average unit cost
For a workorderless item, actual and average cost is updated immediately upon receipt.
Transferred Item
If you selected the Apply addl costs with branch transfers? and Upd item's act/avg cost with xfer costs? options in the System Options Maintenance (XM) program (Inventory Control Options), the Receiver Maintenance (IRC) or Receiving and Inspection (IRI) program updates the Average cost field to include associated costs, such as freight and duty.
Copying Cost Records
When you create a new enterprise item by copying an existing enterprise item record, you can also copy the item's cost record. If you select the Copy branch record during item copy? and Copy item costs during item copy? options in the System Options Maintenance (XM) program (Inventory Control Options), when you copy the enterprise item record the system also copies the cost record. The new record has the copied values for all fields, except Average cost and Actual cost, which are set to 0 (zero).
If you leave the Copy item costs during item copy? option blank, the system creates a cost record, but sets numeric fields to 0 (zero). Non-numeric fields are blank.
Default Record
You can use this program to create a default record for overhead codes and tax settings for Branch Item Maintenance (IMB). Enter * in the Item Number field. Enter the overhead codes and tax settings you want to use for new item maintenance. For more information, see Create a Default Record for a Maintenance Program.
Audit Trail
To activate an audit trail, select one of the files listed below in the Audit Trail Maintenance (XAT) program. The system records all transactions. You can then run the Audit Trails (ATR) program and select that file to print a report of these transactions.
I1AB: Branch Inventory Master File