Cost component setup

To break down an item’s standard cost, sales price, or valuation price, use cost components. With cost components, you can compare estimated and actual costs, calculate production variances, and analyze costs in Standard Cost Calculation.

If cost components are set up in a detailed way, detailed records exist in the Item - Calculated Valuation Prices (ticpr2540m000) session and the Item - Standard Valuation Prices (ticpr3540m000) session. Additional financial integration transactions are created because integration transactions are logged by cost component. A detailed cost component setup also causes additional cost details in domains such as Sales and Warehousing. This increases database growth and makes performance worse, especially during production completion and the item receipt process.

Reduce the number of cost components in the effective cost component structure, which is displayed in the Effective Cost Component Structure (ticpr0112m000) session, as much as possible. The minimum number is three aggregated cost components: one for material, one for operation, and one for surcharges. From a performance point of view, the following is advised:

  • Reduce the number of cost components
    • One operation cost component for all operation rates.
    • One cost component for all subcontracting rates.
    • One cost component for item and warehouse surcharges.
    • One cost component for actual labor rates (in People).

    Ensure you only use cost components that are required.

  • Use aggregated cost components

    The standard cost is calculated by (detailed) cost component for a multilevel BOM. A similar calculation of valuation prices (actual prices) would result in a price structure with many cost components, especially for manufactured items. In case of a warehouse transfer, issue to WIP, and so on, postings are made for every cost component. However, this detailed cost information does not add functional value in Warehousing. If you aggregate cost components, the number of cost components in financial transactions is reduced. Therefore, aggregate operation cost, material cost, and surcharges to the three cost components that are defined in the Items - Costing (ticpr0107m000) session.

    If you do not enter a Standard Cost Component Scheme in the Items - Costing (ticpr0107m000) session, production order costs, production order variances, and surcharges are posted by aggregated cost component. This improves performance and decreases database growth.

Performance aspects
  • Effect on CPU: Yes
  • Effect on database growth: Yes

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