# Create Costing Elements for the Product Costing Model

This document explains how you create costing elements to complement costing components and enhance the calculation and display of product costs in a costing model.

## Outcome

Completing this process allows you to:

• Display subtotals and totals in the costing model (costing element of types 3 and 4)
• Include user-defined calculation bases for percent overhead in the costing model (costing element of type 2)
• Complement the costing model with costing elements functioning as supplementary costing components (costing element of type 1).

Use the costing elements to build a costing model in 'Costing Model. Open' (PCS025).

The costing elements are stored in MCCELE table.

1. Study the Parameters to Set table carefully to identify which costing elements best correspond to the company's costing needs and how they should be configured.

2. Start 'Costing Element. Open' (PCS015).

3. On the B1 panel, enter the alphanumeric costing element ID and costing element type. Select option Create.

4. On the E panel, enter name and description of the costing element.

5. Based on your review of the Parameter to Set table above, select or enter values on the E panel. Press Enter.

## Parameters to Set

Program ID/ Panel Field The field indicates …
Common Fields for all Costing Elements
(PCS015/B1) Costing element type

…the type of the costing element.

The valid alternatives are:

1 = Costing element functioning as a supplementary costing component. The difference between this type of costing element and regular costing components is that 1) there is no limit to the number of costing elements you can use, and 2) the calculated cost for the costing element is not included in the top level of the product structure. Due to the latter difference, this type of costing elements is used restrictively.

2 = Virtual costing element displaying the total of selected costing components, regardless of whether they are included in the costing model that is applied. (You can connect all costing components to such a costing element.) The value of the costing element is included in the totals in the costing model.

3 = Costing element displaying the subtotal of all costing components and costing elements above the costing element in the costing model.

4 = Virtual costing element displaying the total of selected costing components, regardless of whether they are included in the costing model that is applied. (You can connect all costing components to such a costing element.) However, the value of the costing element is not included in the totals in the costing model.

Depending on the type of costing element, different fields are displayed and different alternatives are available when defining the costing element.

Comments on the Usage of Costing Element Types

Costing element types 1 and 2 are not commonly required. They can be included when the standard costing components and cost drivers do not meet the company's requirements.

Costing elements of type 2: Use this type to create an abridged variant of a complex costing model. By only including costing elements of type 2 to which costing components in the regular costing model is connected, only totals for different categories of costing components are displayed. For example, you may want to display only the total of all setup time instead of displaying all costing components relating to machine setup and labor setup time.

You can also use costing elements of type 2 as a calculation base for percent overhead, provided you have selected cost driver 99 for the costing element. Example: You have connected costing components B03 and B04 to costing element OPERAT. In 'Costing Component. Open' (PCS010), you select a costing component with cost driver 99. The 'Overhead base' field is then displayed in (PCS010/E) in which you enter the ID of costing element OPERAT. Finally, as cost rate you select the percentage. The percentage then determines the percent overhead of all costing components connected to the costing element.

Costing elements of type 3: This type of costing elements is the most commonly used, since it provides a cumulative subtotal in the model. A costing element of type 3 is mandatory in order to define the subtotal for inventory accounting as required by 'Settings – Product Costing' (PCS001).

Costing elements of type 4: Use this type to create totals of selected costing components in the costing model. For example, although you have costing components B01, B02 and B03 in the costing model, you only want to display a total for costing components B01 and B03.

Example: You want a subtotal for operation costs in your model but the costing element of type 3 in your costing model presents a cumulative subtotal of material plus labor. The solution is to create an element type 4 to which only the B costing components in your costing model are connected.

(PCS015/E) Costing element responsible …the person responsible for the costing element, used for information purposes only in case you want to know the background of a costing element or change it. (Obligatory value.)
Fields Unique to Costing Elements of Type 1
(PCS015/E) Cost driver …the cost driver to use when calculating cost rates for the costing element.
(PCS015/E) Price decimal place

…as to how many decimal places are used to display the cost in the costing model. The field also determines how many decimal places to use when entering cost rates.

Alternatives:

0 = No decimals

1–4 = From one to four decimals.

Important!

Be consistent with the number of price decimal places for your costing components. The recommendation is to select the number of decimal places selected for the currency plus two.

For costing values related to customer order processing, the number of decimal places is determined by the currency used.

If you select cost driver 99 for the costing element in (PCS015/E), the maximum number of decimals that can be used is two, regardless of the number selected in this field.

(PCS015/E) Cost distribution keys

…the object or objects for which to set cost rates.

Examples of predefined objects that you can select for a cost distribution key are item number, item type, item group and warehouse. You must select an object for at least one cost distribution key. Selecting more objects enables you to define targeted cost rate exceptions, for example, for a specific item from a specific warehouse.

…the costing component whose value to use as a base for calculating overhead cost.

You can select any costing component. M3 calculates the cost by multiplying the costing component value with the percentage selected as cost rate for the costing element.

This field is only displayed for costing elements with cost driver 99. However, the costing component itself can have any cost driver.

Fields Unique to Costing Element Type 3
(PCS015/E) Subtotal number

…the number of the subtotal that the element represents.

Valid numbers are 0 to 9. You can only create one element per subtotal number 1–9, since those subtotal numbers are general and not limited to one costing model. In 'Settings - Product Costing' (PCS001), you select which subtotal number represents the standard cost, which one represents the basis for contribution and profit analysis and so on.

You can create as many subtotals with subtotal number 0 as you like. However, those subtotals are only displayed in 'Product Costing. Display Model' (PCS303); they are not saved in the product costing tables.

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