Costing

Enabling Business Through Open Source Technology

Table of contents
1. OVERVIEW.........................................................................................................3
2. SETUP THE COSTS TO TRACK.......................................................................3
Cost Element Definition............................................................................................................. 3
3. E!I"E THE COST E#E$E"T USE !OR POSTI"%....................................&
Accounting Schema................................................................................................................... 4
Override the Costing Method by Product Category...................................................................
&. I"C#UE AITIO"A# COST !ACTORS.......................................................'
Define Additional Elements........................................................................................................ !
Add the Cost Elements to the Product "ecord.......................................................................... !
(. HOW PROUCT COSTS ARE UPATE........................................................)
System Calculation of #nitial Cost Price..................................................................................... $
Automatic Cost %&date ' E(am&le............................................................................................ $
'. #A"E COSTS..............................................................................................11
). !URTHER COSTI"% "OTES..........................................................................12
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1. O*e+*ie,
*.* +o manage your costs effectively, you must understand the costs for all &roducts you sell at a
transaction level. +hese costs may also include non-material costs such as freight, overhead,
etc. +his allo.s you to determine the actual cost associated .ith each &roduct and therefore
the &rofit that is recogni/ed from its sale. #t also allo.s you to accurately trac0 the costs of
those &roducts you use internally.
*.) +he Costing functionality in ADem&iere is fle(ible and com&rehensive. 1ou can tailor it to
meet your uni2ue business needs. +he detail and level of costs .hich you trac0 is ultimately
u& to you. 1ou can have multi&le &arallel costing methods. An im&ortant issue to remember
is that ultimately, the accuracy of any Costs .ill be due in great &art to the time and effort
s&ent ca&turing and allocating these costs. +here may be instances .here the effort to gather
and allocate some costs 3e.g. electricity usage4 may out.eigh the benefit of recording these
costs.
*.3 As Costing can be defined on multi&le levels and may encom&ass a number of automatically
calculated and user assigned costs, it is best to &lan .hat you .ill be trac0ing. 5o.ever, li0e
everything in ADem&iere, you can modify your costing definition at any time.
2. Set-. t/e Costs to T+ac0
Cost Element Definition
).* Cost Elements allo. you to define the different items that .ill com&rise your costs. 1ou can
define any number of Cost Elements. Some are automatically u&dated by the system6 others
need to be u&dated manually.
).) +o define a Cost Element o&en the Cost Element .indo. found in Performance Analysis 7
Costing 7 Cost Element8
).3 A number of Cost Elements are calculated by the system and should not be modified 3other
than to change the 9ame4 once they are added. +hese include Average #nvoice, Average PO,
:ast #nvoice Price, :ast PO Price, :#;O and ;#;O. Each has a Cost Element +y&e of Material
3as it is associated .ith the movement of an item4 and the associated Costing Method.
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3. efine t/e Cost Ele1ent Use2 fo+ Posting
Accounting Schema
3.* ADem&iere .ill calculate all Material Cost Elements that you have defined but it is the Costing
Method selected in the Accounting Schema that .ill be used .hen &osting the accounting
conse2uences for each document.
3.) +o modify an Accounting Schema o&en the Accounting Schema .indo. found in
Performance Analysis 7 Accounting "ules 7 Accounting Schema8
3.3 Select a Costing Method of :ifo, ;ifo, Average #nvoice, Average PO, :ast #nvoice Price, :ast
PO Price or Standard. +his can be different than the Material Policy selected in the Client
.indo., but it must be com&atible.
3.4 Select a Cost +y&e from those &reviously defined.
3. Select a Costing :evel of Client, if costs should be maintained for the Client, Organi/ation if
se&arate costs should be maintained for each Organi/ation or <atch=:ot if se&arate costs
should be maintained for each uni2ue <atch=:ot.
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Override the Costing Method by Product Category
3.! #f desired you can override the Costing Method selected for the Accounting Schema for a
Product Category.
3.> +o define a different Costing Method, select the Accounting +ab for the Product Category8
3.$ 5ere you can select a Costing Method and Costing :evel to be used by any Product in this
Product Category. #f the Costing Method and Costing :evel are the same as defined on the
Accounting Schema, these fields should be left blan0.
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&. Incl-2e A22itional Cost !acto+s
Define Additional Elements
4.* +here are any number of additional costs you may .ant to include for s&ecific &roducts, for
e(am&le 5andling, Overhead and Ac2uisition Costs. +hese costs may be defined as a fi(ed
amount or a &ercentage of other costs. +o use additional costs, they must first be defined as
Cost Elements.
4.) "ote8 #f Standard Costing is being used, then no additional Costs .ill be included in the Cost
calculation for CO?S. Standard Costing assumes that all additional Costs are already
included.
4.3 As discussed above, to define a Cost Element o&en the Cost Element .indo. found in
Performance Analysis 7 Costing 7 Cost Element.
Add the Cost Elements to the Product Record
4.4 9e(t, add this Cost Element to the Product. +o do this o&en the Product Cost .indo. found in
Performance Analysis 7 Costing 7 Product Cost@
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4. #n this e(am&le .e have selected the Elm +ree. +o add the 5andling cost to the Product Cost,
move to the Product Costs tab8
4.! +o add Costs, select the 9e. "ecord button from the tool bar.
4.> Select the Cost Element of 5andling fee that .as defined earlier.
4.$ Enter either a Current Cost Price or Percent to be used for the 5andling fee Cost. #f you enter
a Current Cost Price that amount is added to the other Costs to determine the final cost for
each unit. #f a Percent is entered, it is multi&lied by the sum of all other costs and added to
the other costs to determine the final cost.
4.A ;or e(am&le, assume that the Costing Method is Average #nvoice. +he Elm +ree has a Cost
Element of Average #nvoice B !.CC and an Ac2uisition Cost Element of !.CC. A 5andling
;ee Cost Element is added for *C.CC. +he final cost .ould be !.CC D !.CC D *C.CC B $*.CC
4.*C #f a 5andling ;ee Cost Element is added for *C &ercent, the final cost .ould be 3!.CC D
!.CC4 E *.*C B >$.*C.
4.** All Cost Prices are added before the Percent is a&&lied.
(. Ho, P+o2-ct Costs a+e U.2ate2
.* Manual Product Costs such as Standard are only u&dated if you change them. #f you do not
enter a cost record it .ill be created based u&on the first material recei&t and then .ill not be
u&dated again automatically.
.) Automatic Product Costs are u&dated .hen the matching transactions Purchase Order or
Fendor #nvoice are &osted. #t is re2uired that matching be done for the costs to be calculated.
#t is also re2uired that the Accounting Processor be running to u&date the Product Costs.
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System Calculation of Initial Cost Price
.3 #f the Current Cost Price is C.CC 3e.g. the first time a &roduct is received into stoc04, .hen the
Material "ecei&t is &osted the follo.ing algorithm is used8
.3.* #f Costing Method is PO based 3Average PO or :ast PO4
A. Standard Cost from the Product Cost .indo..
<. Price from a PO matched to the Material "ecei&t.
C. Price from a Fendor #nvoice matched to the Material "ecei&t.
D. PO Price from the Product .indo., Purchasing tab.
.3.) #f the Costing Method is #nvoice based 3Average #nvoice, :ast #nvoice, :ifo or ;ifo4
A. Standard Cost from the Product Cost .indo..
<. Price from a Fendor #nvoice matched to the Material "ecei&t.
C. Price from PO matched to the Material "ecei&t.
D. PO Price from the Product .indo., Purchasing tab.
.4 #f no Cost is found that can be used, Posting .ill generate the error G9o Current Cost foundH.
Automatic Cost Udate ! E"amle
. ;or the Product Douglas ;ir there are no &rior transactions. +he Costing Method is Average
#nvoice. A Purchase Order is com&leted for 4 +rees .ith a &rice of )C.CC %SD each.
.! A Material "ecei&t is com&leted 3lines created from the PO so it is automatically matched4.
+he Material "ecei&t and the PO -I MM matching record are &osted.
.> +o vie. the Product Costs for the Douglas ;ir o&en the Product Cost .indo. found in
Performance Analysis 7 Costing 7 Product Cost8
.$ +he information dis&layed in the Select Product tab is a sub-set of the information defined in
the Product .indo., Product tab. +his tab is read only. #f any u&dates are re2uired to this
information, it should be done in the Product .indo..
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.A Select the Product Costs tab to vie. the Costs for the Douglas ;ir tree.
.*C +here are ! costs for this &roduct. +his is because there .ere ! Cost Elements that are
calculated that .ere defined for this Cost Method.
.** After &osting the Purchase Order and Material "ecei&t and the associated Matching
transaction, the Current Cost Prices are u&dated for Average PO and :ast PO Price. +hese
values cannot be u&dated manually as they are System Calculated based on the
documents entered.
.*) +he Current Cost Prices for ;ifo, Average #nvoice and :ast #nvoice .ill be u&dated .hen
the #nvoice and associated Matching transactions are &osted.
.*3 One Cost Element that may be u&dated is Standard Costing. Clic0 the data toggle button
on the tool bar to s.itch to single record vie. for Standard Costing.
.*4 1ou may u&date the Current Cost Price and the ;uture Cost Price. +his should be done if
Standard Costing is the Costing Method defined for this Accounting Schema or Product
Category.
.* 9ote8 +he Current Juantity and Accumulated Jty are System maintained and .ill be
u&dated .hen the #nvoice and associated matching transactions are &osted.
.*! 9o. an #nvoice is created from the Material "ecei&t 3again, matching is automatic4. +he
#nvoice amount is >!.CC 3or *A.CC &er tree4. +he #nvoice and associated Matching
Document are &osted.
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.*> +he Product Costs are no. the follo.ing8
.*$ +he Current Cost Price for Standard Costing has been set to the Average #nvoice Current
Cost Price. #f a value had been entered 3other than C.CC4 the system .ould not u&date the
Current Cost Price.
.*A +here are no. Current Cost Prices for ;ifo, Average #nvoice and :ast #nvoice. +hese are
different than the Current Cost Prices for Average PO and :ast PO as the #nvoice Price and
PO &rices .ere different.
.)C Clic0 on the Cost Details tab to see the records that are 0e&t to calculate the Current Cost
Prices.
.)* Every Purchase Order and #nvoice are listed along .ith the Price and Juantity. Khen the
&roduct is Shi&&ed, Moved, Produced or #nventory is adLusted via Physical #nventory, these
transactions .ill also be listed in this tab. All of them may have an im&act on the Product
Costing.
.)) +he Cost Jueue tab dis&lays the current Jueue for a &roduct in regards to :ifo or ;ifo
movement. +o determine the Current Cost Price for a :ifo or ;ifo Costing Method the
movement must be trac0ed.
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'. #an2e2 Costs
!.* 1ou may incur e(&enses for your &roducts that you .ish to include in the cost calculations.
Some e(am&les are ;reight or 5andling Charges. #f you .ant to allocate these additional
costs to the Product or Products received then you .ould create :anded Cost #nvoice :ines.
!.) O&en the #nvoice and Clic0 on the :anded Costs tab.
!.3 Enter the Material "ecei&ts, :ines or Products to allocate this #nvoice :ine amount to.
!.4 Select a Cost Distribution to define .hat basis .ill be for distributing this line amount. +he
choices are Costs, Juantity, Keight or Folume.
!. Select the Cost Element to be used for this :ine.
!.! #n the "eference area, select the Material "ecei&t that these :anded Costs should be
allocated to. 1ou can select Material "ecei&ts for any <usiness Partner. #t does not need to
be the same <usiness Partner as defined on the #nvoice 5eader.
!.> #f necessary you can select a s&ecific "ecei&t :ine or Product to further identify the &roducts
to allocate the costs to.
!.$ Khen you have entered all of the desired :anded Cost records, clic0 the Distribute Costs
button to allocate the Cost.
!.A +he follo.ing message dialog is dis&layed.
!.*C Clic0 the OM button to distribute the costs.
!.** Khen the &rocess has com&leted, clic0 on the :anded Cost Allocation tab to vie. the
results.
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!.*) 5ere, the *CC.CC Cost .as allocated to the 3 lines based on the Juantity. +he calculation
used for the first line is 3) = >4 E *CC B )$.>.
!.*3 +his &rocess is done for each line and if necessary the largest amount is adLusted to
account for rounding differences.
). !-+t/e+ Costing "otes
>.* Since Current Costs are maintained for all Costing Methods defined, you can change the
Costing Method for the Client or Product Category at any time.
>.) #f Production, #nventory Move or Physical #nventory im&acts the Current Cost, the Current
Cost .ill be u&dated. 3e.g Costs being maintained at Organi/ation level and #nventory Move
is done bet.een Organi/ations4.
>.3 ADem&iere uses attributes set instances for costing. #f one is not assigned by the user 3via an
attributes set4 in the PO or Material "ecei&t one is assigned by the system.
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