Calculate estimated end item unit costs of a production order

The end item unit costs are the planned costs of one end item for a specific production order. LN calculates the end item unit costs by means of the estimates for hours and materials (item surcharges included). The calculation of estimated end unit costs of a production order is described in the following paragraphs.

LN calculates the estimated end unit costs when:

You change the production order status.
Depending on the value of the Moment Freezing Estimates field in the Production Order (tisfc0101s000) session, LN calculates the estimated end unit costs as follows:
- During Creating Order: When the production order is planned.
- During Releasing Order: When the production order is released.
- Before First WIP Transaction: Before the first WIP transaction is carried out.
You use the Calculate Estimated End Item Unit Costs (ticst0210m000) session.
You use the Print Differences between Frozen and Current Estimated Costs (ticst0411m000) session. If you use this session, the costs are only printed, not stored.

If you print the differences between the current estimates and the previous calculated values in the Print Differences between Frozen and Current Estimated Costs (ticst0411m000) session, LN calculates the estimated unit costs.

The operation costs and the material costs are determined when you create the production order. The operation costs and the material costs of the end item are calculated when the costs are frozen. The data in the Estimated vs. Actual Material Costs (ticst0501m000) and Estimated vs. Actual Hours Costs (ticst0502m000) session are already filled at this moment. LN does the following when you calculate the estimated end-item unit costs:

Step 1. Determines the operation costs

By means of the Estimated vs. Actual Hours Costs (ticst0502m000) session, LN determines the operation costs per end-item unit by using the production times and the operation rates. LN calculates the operation rates based on the total costs of wages, machines, and overhead.

LN stores the operation costs on the cost components. The operation costs are calculated per end-item unit end product. If results are calculated per work center (see the Financial Transactions by Work Center field in the Production Order Parameters (tisfc0100s000) session), LN calculates the costs per work center. The costs are aggregated in the item-based view of the calculation office by using the aggregated cost components.

Step 2. Calculates the material costs

LN determines the required materials stored in the Estimated vs. Actual Material Costs (ticst0501m000) session. By means of the standard cost, LN calculates the material costs per component.

The standard cost includes the warehouse-related surcharges assigned to the item. If the material is linked to another warehouse, you must change the warehouse surcharge part to this warehouse.

If the work center where the material is issued, is stored as a job shop warehouse, the job shop warehouse-related surcharges must be taken.

LN allocates the material to the job shop warehouse during the release of the order. Even if the calculation is carried out when the order status is not yet released, LN determines the job shop warehouse surcharge. If the material is of Direct Receipt in WIP type, no warehouse surcharge is determined.

If the standard cost is not calculated for a material, LN does not determine material costs.

If you calculate the estimated end unit costs by means of the Calculate Estimated End Item Unit Costs (ticst0210m000) session, you can select the Check Existence of Material Standard Costs check box. If this check box is selected, LN checks whether all material standard costs are available so that LN can make a correct estimation.

Step 3. Calculates the end-item surcharges

After all material and operation costs are calculated, LN calculates the surcharges. The surcharges are calculated in the sequence (item group, item and warehouse level) as defined in the Standard Cost Calculation module.

Step 4. Calculates transfer prices

The WIP transfers can only be calculated when, in the Production Order Parameters (tisfc0100s000) session, the Financial Transactions by Work Center checkbox is selected and the Transfer WIP method is Always or Only upon Completion. The calculated price is the incremental price up to the last operation of the delivering work center.

Example

Quantity Ordered = 100 pcs
	Work Center 1
	operation 10	operation 20
yield %	100	50
qty plan in	200	200
qty plan out	200	100
net mat per 10 pcs	1 pcs	3 pcs
estimated material qty	20 pcs	60 pcs
cost per pcs	$ 5	$ 10
total costs	$ 100	$ 600
per pcs, per workcenter	$ 1.00	$ 6.00

	Work Center 2
	operation 30
yield %	100
qty plan in	100
qty plan out	100
net mat per 10 pcs	2 pcs
estimated material qty	20 pcs
cost per pcs	$ 6
total costs	$ 120
per pcs, per workcenter	$ 1.20

The transfer price from work center 1 to work center 2 =

($100 + $600) / 100 = $7.00

The transfer price from work center 2 to calculation office =

 $7.00 + $1.20= $8.20

The base for calculation are all cost components of material and operation costs. The amounts are aggregated together and stored in a transfer price on the transfer component WIP Transfer Cost Component that is defined in the Production Order (tisfc0101m100) session.

Refer to the Help of the JSC Financial Transactions (ticst3500m000) session and the PCS Financial Transactions by Transaction Origin and Financial Trans. (tipcs3500m000) session for details about financial transactions.