Understanding Inventory Cost Levels

The cost level that you assign to an item indicates the level at which the system maintains costs. You determine whether the system maintains one overall cost for an item (cost level 1) or a different cost for the item in each branch/plant (cost level 2). The system can also maintain a different cost for each location and lot within a branch/plant (cost level 3).

You should assign cost level 3 if you use actual costing. For configured items, you must assign cost level 3. However, the system does not support cost level 3 for standard costing.

After you have initially assigned an inventory cost level to an item in the Item Master program (P4101), you should not change the cost level manually on the Item Master Revisions form. Instead, use the Item Cost Level Conversion program (R41815) to change the cost level for an item.