Estimating Standard Costs

You can use the Manage Standard Costs task in the Cost Accounting work area to create estimated standard costs for all purchased items. The standard costs are created for a scenario that's already mapped to a cost organization and cost book.

The cost estimation process includes these functionality:

Cost estimates for purchased items can be shared across all of the inventory organizations mapped to the cost organization and pointing to the same valuation unit.
Estimated costs for purchased items can be entered directly in the UI or imported using a spreadsheet.
You can enter estimates that include one or more cost elements.
If you enter a cost estimate for an overhead cost element, you must specify an expense pool.
If you want to absorb costs against multiple expense pools, you can enter multiple rows for overhead costs.
Standard cost material overheads can be defined for CTO model work definitions. The CTO model overhead is applied to configured items created from the model's work definition.
The logical receipt for a drop shipped standard costed item is costed at its effective standard cost. The valuation of logical receipts is aligned with the valuation of physical purchase order receipts.
Estimated costs for purchased items can have effective dates that are in the past, current, or future.
Cost estimates for purchased items can be revised using the mass edit functionality and can be increased or decreased by a percentage or a specific value.
You can calculate standard costs for configurations on purchase order approval and use these costs to calculate variances at purchase receipt.
You can initiate and run multiple simultaneous standard cost roll ups. You can submit a request and run a cost roll up for a cost organization even if a prior cost roll up for that organization hasn't yet completed.
In the case of supply chain cost rollup, you can define the actual buy costs for procured items if the buy sourcing rules exists for the item.

Estimating Standard Costs for Assemblies

The cost scenario is used to estimate the rolled-up cost of the manufactured items based on the selected work definitions. You can perform incremental cost rollups to estimate manufactured item costs, and incorporate mid-period corrections and rolling forecasts into estimates. You can use the Roll up Costs task on the Manage Cost Scenario page to calculate the total product costs.

Note: If Cost Allocation is set to Fixed for an output item in the manufacturing work definition operation, you must define a standard cost for this item. The standard cost method is used to cost all work order operation outputs that have Cost Allocation set to Fixed, irrespective of the cost method set on the item cost profile. If a standard cost isn’t defined for such an item, when processing the transactions, the cost processor will give an error stating the standard cost is missing. Also, the Cost Allocation attribute is used only for process manufacturing.

Standard Cost for Procured Items

In the case of supply chain cost rollup, you can define the actual buy costs for procured items when defining the standard costs using the Buy Cost attribute in the Create Standard Costs page and the Import Standard Costs FBDI or desktop spreadsheet. The buy cost will be used by the Roll up Costs process only if the cost scenario is enabled for supply chain cost rollup and a buy sourcing rule exists for the item in the sourcing assignment. The process calculates the standard cost of the item based on the sourcing rule and its allocation percentage.

If an item is sourced using 100% Buy From sourcing rule, its standard cost is equal to the buy cost. The standard cost is used in cost accounting to process transactions. When you enter a buy cost, the status of the record is In process within cost scenario and is available within that cost scenario to calculate the standard cost of the item and roll up the costs of higher assemblies. When a buy cost is published using the Update Standard Costs process, it is used to roll up the item cost in the subsequent cost scenarios. An item with the Buy From sourcing rule should have the buy cost defined in the system, else the system would report an error.