Cost Rollup Steps and Review of Calculations

Cost Rollup Steps and Review of Calculations

  NOTE  In performing Simulated Cost Rollups, the following steps are suggested:
 

Step 1:  Select the Cost Rollup Simulate Run indicator and select the Submit button.

Step 2:  Review the results using the Costed BOM reports.

• Cost Rollup Single Level Simulated (Navigation:  Standard Costs > Costed BOM > Cost Rollup Single Level Simulated)

• Cost Rollup Cumulative Simulated (Navigation:  Standard Costs > Costed BOM > Cost Rollup Single Cumulative Simulated)

Step 3:  Make data changes as required (Return to Step 1) or non (if non go to Step 7).

Step 4:  Select the Cost Rollup Simulate Run Indicator and select the Submit button.

Step 5:  Review – the results using the Costed BOM reports.

• Cost Rollup Single Level Simulated (Navigation:  Standard Costs > Costed BOM > Cost Rollup Single Level Simulated)

• Cost Rollup Cumulative Simulated (Navigation:  Standard Costs > Costed BOM > Cost Rollup Single Cumulative Simulated)

Step 6:  Enter data changes as required (Return to Step 1) or if no changes (go to Step 7).

Step 7:  Run Generate/Apply Simulated Rollup Cost. Check the Move Costs to Simulated Cost Fields Indicator. This step moves the Simulated Cost Rollup values to the Inventory Item Std Cost record.
 

Logic:  Cost Rollup Simulation Run Indicator is checked:
 

If the Cost Rollup Simulation Run is checked, the process is as follows.

1. The effective date which is used for the Bill of Material explosion and Routing extraction will be stamped on both the Cost Rollup Item Master file and the Inventory Item Standard Cost file. The effective date is initialized to the current date but can be overridden by the user.

2. This cost rollup can be run for both standard cost and average cost divisions. If average cost, there is no cost accounting impact when standards are rolled from simulated to current.

3. Every time this logic is processed, the Cost Rollup Item Master file is regenerated by processing each Inventory Item Master for the Division, and the Low-Level Code is also stamped on this Cost Rollup Item Master Record so that the file can be processed in the reverse Low-Level Code sequence. Other information, in addition to the Inventory Item Master, that is also stamped on this Cost Rollup Item Master Record includes:

   1. The Engineering Item Master (e.g. source code and part type)

   2. Purchase Item Master

   3. Inventory Commodity Code

   4. Division Record (e.g. overhead labor, fringe, machine rate)

4. Other key field settings in the Cost Rollup Item Master record includes:

• A ‘Descending low-level code’ value is set to 99 minus the Low-Level Code as retrieved from the Engineering Item Master.

• The Standard Material Unit Cost which is set from that Inventory Item Standard Costs Record’s item’s Simulated Purchase Price.

• The Source Code will determine the major processing logic.

• The item scrap factor can affect material costs. Scrap Factor is used to indicate how much of the component will be lost during the manufacturing process for each parent item produced. For example, If a scrap factor of .5 means 1/2 components will be lost during the manufacturing process.

• Standard Order Quantity is used to set unit labor costs when the operation’s standards are ‘elapsed time’ (versus ‘piece rate’). This is a field that is on the Inventory Item Standard Costs record, Cost Rollup Parameters tab.

• Engineering Unit of Measure from the Engineering Item Master.

• Inventory Unit of Measure from the Inventory Item Master.

• Purchasing Unit of Measure from the Purchase Item Master.

• The derivation of the Engineering to Inventory Unit of Measure Conversion Factor is used when extracting the Bill of Material components and getting the requirements for cost in the Inventory Unit of Measure.

• The derivation of the Purchasing to Inventory Unit of Measure Conversion Factor.

• The Inventory Commodity Code Material Overhead Rate and the item Material Overhead Rate, one of which (depending on the Commodity Code override value) will be used in the derivation of the unit material burden cost.

• The Inventory Commodity Code reference routing value is used to extract a routing for the item if the item does not have a specific routing associated with the Item Number.

5. For each Cost Rollup Item Master Record, the following logic is performed:

   1. If the Source Code is Purchased, then

      1. The Standard Single Level Material Unit Cost is set from that item’s Simulated Purchase Price.

      2. The Single Level Unit Overhead Material Cost is set.

      3. Both of these costs are divided by the Item Scrap Factor (if the scrap factor is not 1.0).

      4. The Cumulative Unit Costs are set to the Single Level Unit Costs.

   2. If the Source Code is Manufactured, then

      1. The Effective Bill of Material is retrieved and, for each component, the following is done:

         1. If the Component retrieved is a ‘Phantom’, its components are exploded and the processing of each of those components follow (as described in this section).

         2. Consideration is accorded the following information when computing the costs:

            1. Quantity per or fixed quantity.

            2. The setup quantity, if any.

            3. The Engineering to Inventory Unit of Measure conversion factor.

         3. Consideration is accorded if there is a Bill of Material scrap factor on the Bill of Material override record.

         4. As each Bill of Material component record is processed the following cumulative unit standard costs are derived by using the component’s cumulative unit standard costs (extended by the quantity per and adjusted by scrap factors and Unit of Measure conversion factors) to increment the rolling cumulative cost total for the item:

            1. Cumulative unit material cost.

            2. Cumulative unit material overhead cost.

            3. Cumulative unit labor cost.

            4. Cumulative unit labor overhead cost.

            5. Cumulative unit fringe overhead cost.

            6. Cumulative unit machine overhead cost.

            7. Cumulative unit subcontract material cost.

            8. Cumulative unit subcontract labor cost.

      2.  The Effective Routing is retrieved and, for each operation, the following is done:

         1. The single level costs are calculated for the labor, overhead, and machine costs.

         2. As each operation is processed, these single level costs are accumulated so that there can be one set at the item level.

         3. The cumulative costs for unit labor, labor overhead, fringe overhead, machine overhead, and subcontract labor are set to the single level costs.

   3. If the Source Code is Subcontract Purchased, then

      1. The Standard Single Level Subcontract Material Unit Cost is set from that Item’s Simulated Purchase Price.

      2. The Single Level Unit Overhead Material Cost is set.

      3. Both of these costs are divided by the Item Scrap Factor (if the scrap factor is not 1.0).

      4. The Cumulative Unit Costs are set to the Single Level Unit Costs.

      5. The Effective Bill of Material is retrieved and the processing is identical to that which is done for a manufactured item.

Single Level Unit Material Cost:

1. For Purchased items, as noted above, the item’s single level unit material cost is set from the Item’s Simulated Purchase Price which is on the Inventory Item Standard Costs Record.

2. If there is an Item Scrap Factor, then this single level unit material cost is divided by that factor.
    

Single Level Unit Subcontract Material Cost:

1. For Subcontract Purchased items, as noted above the item’s single level unit subcontract material cost is set from the Item’s Simulated Purchase Price which is on the Item Standard Cost Master Record.

2. If there is an Item Scrap Factor, then this single level unit material cost is divided by that factor.
    

Single Level Unit Overhead Material Cost:

1. The Material Overhead Rate is on the Commodity Code unless overridden at the Item Master Record level.

2. For Purchased Items, the Single Level Unit Material Overhead Cost is equal to the Single Level Unit Material Cost multiplied by the Material Overhead Rate.

3. For Subcontract Purchased Items, the Single Level Unit Material Overhead Cost is equal to the Single Level Unit Subcontract Material Cost multiplied by the Material Overhead Rate.

Refer:  Single and Cumulative Level Costs for single Single Level Unit Labor, Labor Overhead, Fringe Overhead, Machine Overhead Costs, and Cumulative Unit Material, Subcontract Material, Labor, Labor Overhead, Fringe, Machine Costs
 

Single Level Unit Subcontract Labor Cost:

1. For Manufactured items, the item’s single level unit material cost is set from the Item’s Simulated Purchase Price, which comes from the Inventory Item Standard Costs Record.

2. If there is an Item Scrap Factor, then this single level unit material cost is divided by that factor.

3. For a manufactured item it is assumed that this subcontract labor is actually an outside process, as represented by the purchase price.
    

Move Cost to Simulated Cost Fields Indicator is checked:

The action moves the Simulated Cost Rollup values to the Inventory Item Std Cost record.

The updated results can be viewed on the Inventory Item Std Cost Record.
 

Cumulative Simulated Tab
 

Fields
 

Simulated Material:  This is the cumulative simulated unit cost of Material. Material cost is the price paid to a Vendor for a Purchased Item.

Simulated Labor:  This is the cumulative simulated unit cost of Labor. Labor is the Labor hours x Labor Grade rate (as defined on Routing Operations for this Manufactured Item).

Simulated Material Ohd:  This is the cumulative simulated unit cost of Material Overhead. Material OHD cost is Material Cost x Material OHD rate (as defined on the Inventory Item Master record).

Simulated Labor Ohd:  This is the cumulative simulated unit cost of Labor Overhead. Labor OHD is Labor cost x Labor OHD rate (as defined on the Department record).

Simulated Fringe Ohd:  This is the cumulative simulated unit cost of Fringe Overhead. Fringe OHD is Labor Grade rate x Labor hours x Fringe OHD rate (as defined on the Department record).

Simulated Machine Ohd:  This is the cumulative simulated unit cost of Machine Overhead. Machine OHD is the Machine rate x Machine hours (as defined on the Item's Routing).

Simulated Subcontract Material:  This is the cumulative simulated unit cost of Subcontract Material. Subcontract Material is the value-added cost that the Subcontract Vendor charges to produce Subcontract Items.

Simulated Outside Labor:  This is the cumulative simulated unit cost of Outside Labor. Outside Labor is the cost of outside processing (as defined on the Item's Routing Operations).

Simulated Total:  This is the total cumulative simulated unit cost.
 

Single Level Simulated Tab
 

Fields
 

Simulated SL Material:  This is the single-level simulated unit cost of Material. Material cost is the price paid to a Vendor for a Purchased Item.

Simulated SL Labor:  This is the single-level simulated unit cost of Labor. Labor is the Labor hours x Labor Grade rate (as defined on Routing Operations for this Manufactured Item).

Simulated SL Material Overhead:  This is the single-level simulated unit cost of Material Overhead. Material OHD cost is Material Cost x Material OHD rate (as defined on the Inventory Item Master record).

Simulated SL Labor Ohd:  This is the single-level simulated unit cost of Labor Overhead. Labor OHD is Labor cost x Labor OHD rate (as defined on the Department record).

Simulated SL Fringe Ohd:  This is the single-level simulated unit cost of Fringe Overhead. Fringe OHD is Labor Grade rate x Labor hours x Fringe OHD rate (as defined on the Department record).

Simulated SL Machine Ohd:  This is the single-level simulated unit cost of Machine Overhead. Machine OHD is the Machine rate x Machine hours (as defined on the Item's Routing Operations).

Simulated SL Subcontract Material:  This is the single-level simulated unit cost of Subcontract Material. Subcontract Material is the value-added cost that the Subcontract Vendor charges to produce Subcontract Items.

Simulated SL Outside Labor:  This is the single-level simulated unit cost of Outside Labor. Outside Labor is the cost of outside processing (as defined on the Item's Routing Operations).
 

SEE ALSO
 

Generate-Apply Simulated Rollup Costs
Single and Cumulative Level Costs