1. Using Supply Chain Cost Management
  2. Cost Rollup for Process Manufacturing

Cost Rollup for Process Manufacturing

Standard cost rollup supports process manufacturing work definitions with multiple outputs, where the production method requires ways to manage variability that's inherent in materials and processes. This is useful if you require a hybrid of discrete and process manufacturing capabilities.

You can specify the costing batch size to determine the standard cost of production batches and allocate costs based on a fixed cost or a percentage of the total cost, for the primary product, co-products, and by-products.

The Roll up Costs process calculates the costs of output items with active work definitions, based on the cost allocation defined on the work definition operations. When output items are setup with fixed cost allocation, the system expects you to enter the costs of these items manually using the Standard Costs page or bulk interfaces. The entered costs are used to process product completion transactions.

Costing Priority

You could change the sourcing decisions for materials based on different considerations including cost, quality, and other competitive advantage. You may choose to procure an item that you previously manufactured in-house. In this case, you don't need to deactivate or delete the manufacturing work definition for the item. Instead, you just specify the costing priority, which is an optional attribute, in the work definition. This attribute can be changed based on your requirements.

You can also set the costing priority if you've standard costs shared across multiple inventory organizations and you want to select the manufacturing organization that must be used to calculate the standard cost of the product.

You can set the costing priority in the work definition to 0 when you don't want the Roll up Costs process to calculate the cost of that item. Also, you can set the costing priority of multiple work definitions of an item to 0 in a manufacturing plant. The Roll up Costs process excludes work definitions with costing priority set to 0 from being rolled up. When you enter a standard cost estimate for such an item and that cost will be used to roll up the cost of products using the item.

Note:

If the standard cost of an item is shared across organizations, the Create Cost Accounting Distributions process will report job close variances if there are discrepancies between the planned production (work definition) used in cost planning and the execution in cost accounting.

Phantom Items in Work Orders

If a subassembly in a work order has the supply type as Phantom, then you must ensure that it has an active item structure as of the scenario effective date. For subassemblies with the supply type as Phantom in the work definition of a higher assembly, the Roll up Costs process will follow this in the order listed:

  • Check whether a work definition exists for the phantom item and use that to roll up the cost.

  • If a work definition doesn’t exist for the phantom item, then the process would use the item structure of the phantom item to roll up the cost.

  • If neither a work definition exists nor an item structure for the phantom item, then the process will log an error.

For a subassembly with the supply type as Phantom in the work definition of a higher assembly:

  • Single-level cost rollup uses the published cost of phantom subassembly including the overhead when calculating the final product cost.

  • Full cost rollup excludes the overhead on phantom subassembly because the Roll up Costs process breaks the phantom subassembly all the way through to its components and, therefore, the overhead isn't applied on the phantom itself.