Automatically Entering Cost Rates for Costing Components

This document describes how to automate the calculation of cost rates for most combinations of costing components and cost drivers, except subcontracting costs.

Company policy determines how often to update cost rates. Some companies review their cost rates every year, others every period.

Outcome

Cost rates are defined for material overhead, operation costs, tool costs and other common costs based on a cost budget.

The cost rates are applied when you calculate the costs of a product and display them in a costing model. See Managing M3 Product Costing.

The following tables are updated: MCCODA (costing component data), MCMACO (material overhead), MCWCCO (work center data), MCTOCO (tool data) and MCPRCO (product overhead).

Before you start

Follow These Steps

  1. Select Accounts to Include in Calculation

    For each department, or for the company in general, select a range of accounting identities and a percentage to determine the share to transfer from the budget. You do this in 'Costing Component. Connect Accounts' (PCS013).

    You can define departments and ranges of accounting identities for the following costing components: A04 and A05 (material overhead), all B costing components (operation costs), all C costing components (tools costs), and all E costing components (other common costs).

  2. Retrieve Costs from Cost Budget

    Run 'Costing Total. Transfer from BUD' (PCS480) to transfer budgeted costs from a selected budget and budget period to M3 Product Costing. As a result, the cost that will be used to calculate the cost per cost driver unit (CDU) is shown as the 'Calculated amount' for each department in (PCS012). The cost driver determines what the units are, such as man hours or the number of punches of a machine that are required to produce an item.

    What values are transferred from the budget depends on the departments and accounts you have connected to each costing component.

  3. Calculate Cost Rate per CDU

    You can start the automatic calculation of cost rates in the following ways. Once you have calculated the cost per CDU, the result for the costing component is shown as the cost rate in 'Costing Component. Enter Values' (PCS011).

    Category Costing Components Program
    Material overhead A04 and A05 Run 'CDU & Rate. Calculate for Material Overhead' (PCS440).
    Operation costs B costing components Run 'Resource Driver. Calculate Rate' (CAS260). Note: This program has replaced the previously used 'CDU & Rate. Calculate for Work Center' (PCS450).
    Tool costs C costing components Run 'CDU & Rate. Calculate for Tool' (PCS460).
    Other common costs E costing components Run 'CDU & Rate. Calculate for Product' (PCS740).

    Alternative Method for B Costing Components

    For the B costing components, there is an alternate method of retrieving cost rates using resource drivers from M3 Cost Accounting.

    Important!

    If you already have cost rates set, either manually or automatically, these rates will be overwritten if they have the same costing date and belong to the same costing type as the new rates.

  4. Review Results

    Once the rate per CDU is set in (PCS011), you can review the results for the cost distribution keys you have selected by selecting option 12='Enter costing rates' for each costing component in (PCS010). The following program is then displayed:

    • For A costing components: 'Costing Component. Enter Material O/H' (PCS115)
    • For B costing components: 'Costing Component. Create Cost Rates' (PCS120)
    • For C costing components: 'Costing Component. Enter Tool Cost' (PCS105)
    • For E costing components: 'Costing Component. Create Cost Rates' (PCS120).

    You can adjust the cost rates manually.

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